Question

Flint Company purchased equipment for $231,080 on October 1, 2017. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $13,080. Estimated production is 40,000 units and estimated working hours are 20,300. During 2017, Flint uses the equipment 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.

(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

A	Straight Line depreciation for the period of 3 months
	(Cost - Salavage value)/Life of the asset * Number of months/12
	($231080-$13080)/8 years * 3/12
	27250*3/12
	6813
B	Activity Method ( units of output) for 2017
	($231080-$13080)*1000 units/40000 units
	$218000*1000/40000
	$5,450
C	Activity Method ( working hours ) for 2017
	($231080 - $13080)*520/20,300
	$218000*520/20300
	5584.236
D	Sum of years digits method
	n(n+1)/2
	8(9)/2
	36
	year	Sum of years digit	cost - scrap	Total
	2017	8/36	218000	12111.11
	2018	7/36	205888.9	40033.95
	2019	6/36	218000	36333.33
E	Double Decling Balance method
	Rate of depreciation
	1/8*2
	0.25
	Year	calculation	$
	2017	231080*0.25*3/12	14442.5
	2018	(231080-14443)*0.25	54159.25