Muggsy Bogues Company purchased equipment for $212,000 on October 1, 2014. It is estimated that the equipment

Question:

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.

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 2014.

(b) Activity method (units of output) for 2014.

(d) Sum-of-the-years’-digits method for 2016.

(e) Double-declining-balance method for 2015.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...