Muggsy Bogues Company purchased equipment for $319,890 on October 1, 2014. It is
ID: 2477934 • Letter: M
Question
Muggsy Bogues Company purchased equipment for $319,890 on October 1, 2014. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $20,400. Estimated production is 40,200 units and estimated working hours are 19,300. During 2014, Bogues uses the equipment for 530 hours and the equipment produces 1,100 units.
Compute depreciation expense under each of the following methods. Bogues is on a calendar-year basis ending December 31.
Straight-line method for 2014
$.........................
Activity method (units of output) for 2014
$.............................
Activity method (working hours) for 2014
$................................
$.........................
Double-declining-balance method for 2015
$.....................
(a)Straight-line method for 2014
Explanation / Answer
a) Straight line method
Depreciation rate = (Cost - Salvage) / Useful Life = (( $319,890 - $20,400) / 8) / $319,890 = 11.702%
Depreciation amount 31.12.2014 = 319,890 X 11.702% X 3/12 = 9,358.38
b) Activity method (units of output) for 2014
Depreciation amount = (Cost - Salvage ) X Output produced / Total Output
= (319,890 - 20,400) X 1,100 / 40,200
= 8,195
c) Activity method (working hours) for 2014
Depreciation amount = (Cost - Salvage ) X Hours Worked / Total Hours
= (319,890 - 20,400) X 530 / 19,300
= 8,224.33
d) Sum-of-the-years'-digits method for 2016
Depreciation Aamount = ( Cost - Salvage value ) X no. of years left / total oh No.
= (319,890 - 20,400) X 8 / 36
= 66,553.33
e) Double-declining-balance method for 2015
SLR = 1 X 100 / useful life = 1 X 100 / 8 = 12.5%
Double declining rate = 12.5% X 2 = 25%
2014 = 319,890 X 25% = 79,972.50
2015= (319,890 - 79,972.50) X 25% = 59,979.375
Year No. 2014 8 2015 7 2016 6 2017 5 2018 4 2019 3 2020 2 2021 1 Total 36Related Questions
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