I. Metro Co. purchased equipment for $212,000 on 9/1/x1. It is estimated that th

Question

I. Metro Co. purchased equipment for $212,000 on 9/1/x1. 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 20,000. During 20x1, Metro used the equipment for 525 hours and the equipment produced 1,000 units.

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

1) Sum-of-the-years' method for 20x3

2) Double-declining balance method for 20x2

3) Activity method (units of output) for 20x1

Explanation / Answer

1. Sum of the years method for 20×3 = $37500

2. Double-declining balance method for 20×2 = $49688

3. Activity method (units of output) for 20×1 = $5250

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