E11-6 Muggsy Bogues Company
purchased equipment for $212,000 on October 1, 2014. 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 2014, 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.
(a) Straight-line method for
2014 $(b) Activity method (units of output) for 2014 $
(c) Activity method (working hours) for 2014 $
(d) Sum-of-the-years'-digits method for 2016 $
(e) Double-declining-balance method for 2015 $
SOLUTION PREVIEW
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(a)
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2014
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Straight-line
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$212,000 – $12,000
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= $25,000/year
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8
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3
months—Depreciation = ($25,000 X 3/12) =
$6,250
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