Please help by explaining how to get each number. Will rate! E11-6 (LO1 ,2) (Dep
ID: 2564237 • Letter: P
Question
Please help by explaining how to get each number. Will rate!
E11-6 (LO1 ,2) (Depreciation Computations Five Methods, Partial Periods) Muggy Bogues Company purchased equip- ment 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 $12,000. Estimated production is 40,000 units and estimated working hours are 20,000. During 2017, Bogues uses the equipment for 525 hours and the equipment produces 1,000 units Instructions Compute depreciation expense under each of the following methods. Bogues is on a calendar-year basis ending December 31. (a) Straight-line method for 2017. (b) Activity method (units of output) for 2017.Explanation / Answer
a)Depreciation expense : [cost-salvage]/useful life
= [212000- 12000]/ 8
= 200,000/ 8
= 25,000
depreciation expense for2017 =25000*3/12=$ 6250 [1October- 31december]
b)Activity rate per unit =[cost-salvage]/useful life in units
= [212000-12000]/40000
= $ 5 per unit
Depreciation expense for 2017 : 1000*5 =$5000
c)Activity rate = [cost-salvage]/useful life in hours
= [212000-12000]/20000
= $ 10 per hour
Depreciation for 2017 : 525*10=5250
d)sum of digit :8+7+6+5+4+3+2+1= 36
2017 =3/12 =.25 years [1oct-31dec]
Year left to life at 2019 8-.25-1 (2018)=6.75 years
Depreciation expense [cost -salvage]*years left /Total sum digits
=[212000-12000]*6.75/36
= 200000*6.75/36
= 37500
e)Rate of depreciation =2 /useful life
= 2/8
= .25 or25%
Depreciation for 2017 =cost*rate*n/12
= 212000*.25*3/12
= 13250
Depreciation expense for 2018 : [cost-accumulated depreciation]*rate
=[212000-13250]*.25
= 49687.50
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