Question

Muggsy Bogues Company purchased equipment for $212,000 on October 1, 2017. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 40,000 units and estimated working hours are 20,000. During 2017, Bogues uses the equipment for 525 hours and the equipment produces 1,000 units. Compute depreciation expense under each of the following methods. Bogues is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, e.g. 5.35 and final answers to 0 decimal places, e.g. 45,892.) (a) Straight-line method for 2017 $ (b) Activity method (units of output) for 2017 $ (c) Activity method (working hours) for 2017 $ (d) Sum-of-the-years'-digits method for 2019 $ (e) Double-declining-balance method for 2018 $

Answer 1

Answer:

(a) Straight-line method for 2017 $25000

(b) Activity method (units of output) for 2017 $ 5000

(c) Activity method (working hours) for 2017 $ 5250

(d) Sum-of-the-years'-digits method for 2019 $ 33333

(e) Double-declining-balance method for 2018 $ 37500

Explanation:

         Units Hours Straight-line  

             M1          M2          M3  

Cost      212000 212000 212000  

salvage value 12000 12000 12000  

              200000 200000 200000  

Use estimate 40000 20000 8  

Depreciation

p( Units/hours)  5,00 10,00 1  

                 1000 525 25000  

                 5000 5250 25000  

   

   

   

Three Years Digit    

   

SYD =n(n+1)2 2017    

SYD =8(8+1)2    

SYD=36    

   

2017 200000 8 36 44.444,44

2018 200000 7 36 38.888,89

2019 200000 6 36 33.333,33

2020 200000 5 36 27.777,78

2021 200000 4 36 22.222,22

2022 200000 3 36 16.666,67

2023 200000 2 36 11.111,11

2024 200000 1 36 5.555,56

   

Double-declining-balance    

Depreciation rate = 1/useful life *100 = (1/8) * 100 = 12.5%    

= 12,5%*2  

2017 200.000,00 25,00% 50.000,00 150.000,00

2018 150.000,00 25,00% 37.500,00 112.500,00

2019 112.500,00 25,00% 28.125,00 84.375,00

2020 84.375,00 25,00% 21.093,75 63.281,25

2021 63.281,25 25,00% 15.820,31 47.460,94

2022 47.460,94 25,00% 11.865,23 35.595,70

2023 35.595,70 25,00% 8.898,93 26.696,78

2024 26696,77734 25,00% 6.674,19 20.022,58