Agazzi Company purchased equipment for $396,625 on October 1, 2012. It is estima

Question

Agazzi Company purchased equipment for $396,625 on October 1, 2012. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $31,040. Estimated production is 39,100 units and estimated working hours are 19,400. During 2012, Agazzi uses the equipment for 540 hours and the equipment produces 1,100 units.

Compute depreciation expense under each of the following methods. Agazzi is on a calendar-year basis ending December 31.

(a) Straight-line method for 2012 (Round answer to 0 decimal places, e.g. $45,892.) $ (b) Activity method (units of output) for 2012 (Round rate per unit to 2 decimal places, e.g. $5.35 and final answer to 0 decimal places, e.g. $45,892.) $ (c) Activity method (working hours) for 2012 (Round rate per hour to 2 decimal places, e.g. $5.35 and final answer to 0 decimal places, e.g. $45,892.) $ (d) Sum-of-the-years Agazzi Company purchased equipment for $396,625 on October 1, 2012. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $31,040. Estimated production is 39,100 units and estimated working hours are 19,400. During 2012, Agazzi uses the equipment for 540 hours and the equipment produces 1,100 units. Compute depreciation expense under each of the following methods. Agazzi is on a calendar-year basis ending December 3

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Depreciation for 2012 = (396625 - 31040)/8*(3/12) = 11425

Part 2:

Depreciation for 2012 = (396625 - 31040)/(39100)*1100 = 10285

Part 3:

Depreciation for 2012 = (396625 - 31040)/(19400)*540 = 10176

Part 4:

Depreciation for 2014 = (396625 - 31040)*6/36 = 60931

Part 5:

Depreciation Rate = 1/8*2 = 25%

Depreciation for 2012 = 396625*25%*3/12 = 27489

Depreciation for 2013 = (399625 - 27489)*25% = 93034

Thanks.

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