Excrcise 11-6 Flint Company purchased equipment for $218,925 on October 1, 2017.

Question

Excrcise 11-6 Flint Company purchased equipment for $218,925 on October 1, 2017. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,600. Estimated production is 39,300 units and estimated working hours are 19,9od During 2017, Flint uses the cquipment for 520 hours and the equipment produces 1,000 units. Compute depreciation expense under each of the following methods. Flint is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 declmal places, e.g. 5.35 and final answers to 0 decimal places, e.g 45,892.)

Explanation / Answer

Calculate depreciation expenses :

Straight line method = Original cost-salvage value/useful life

= 218925-12600/8

Striaght line method = 25791

Straight line method for 2017 = 6448

b) Activity method (units of output) for 2017 = Original cost-salvage value/Estimated units of production

= 218925-12600/39300

Depreciation rate = 5.25 per unit

activity method (unit of output) for 2017 = 5.25*1000 = 5250

c) Activity method (working hours) for 2017 = Original cost-salvage value/Estimated hours

= 218925-12600/19900

Depreciation rate = 10.37 per hour

activity method (working hours) for 2017 = 10.37*520 = 5392

d) sum of year digit method :

SUm of year digit =8+7+6+5+4+3+2+1 = 36

Sum of years digit method dep for 2019 = 206325*7/36*9/12+206325*6/36*3/12 = 38686

e) Double decline balance method :

Straight line rate = 100/8 = 12.5%

Double decline rate = 12.5*2=25%

Double decline balance dep for 2018 = 206325*25%*9/12+(206325-51581)*25%*3/12 = 48358

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