Question

Bramble Company purchased equipment for $220,800 on October 1, 2020. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 36,000 units and estimated working hours are 20,000. During 2020, Bramble uses the equipment for 500 hours and the equipment produces 1,100 units.

Compute depreciation expense under each of the following methods. Bramble is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, e.g. 5.35 and final answers to 0 decimal places, e.g. 45,892.)

(a)		Straight-line method for 2020		$enter a dollar amount
(b)		Activity method (units of output) for 2020		$enter a dollar amount
(c)		Activity method (working hours) for 2020		$enter a dollar amount
(d)		Sum-of-the-years'-digits method for 2022		$enter a dollar amount
(e)		Double-declining-balance method for 2021		$enter a dollar amount

Answer 1

(a) Straight-line method for 2020 (6) Activity method (units of output) for 2020 (c) Activity method (working hours) for 2020 (d) Sum-of-the-years digits method for 2022 (e) Double Decling balance method for 2021 $ 6,525 $ 6,380 S 5.220 $ 39,150 $51,750 Working Notes: Equipment Cost = $220.800 Salvage value = $12,000 useful Life = 8 Years (a) Straight Line Depreciation = (Machinery cost - Salvage value)/Useful life = ($220.800-$12.000)/8 = $26.100*3/12 = 56,525 (6) Activity method (units of output) for 2020 Depreciation for 2020 =($220,800-$12,000)*1,100/36,000 = $6,380 (c) Activity method (working hours) for 2020 Depreciation for 2020 =($220.800-$12,000)* 500/20.000 = $5,220 (d) Sum of years digits method Sum of digits = 8(8+1)/2 = 36 Depreciation for 2022 = ($220,800-$12,000)*7/36*9/12+($220,800-$12,000*6/36*3/12 = $39,150 (e) Double Decling balance method Depreciation rate = 1/8*100*2 = 25% Depreciation for 2020 = $220.800*25%*3/12 = $13,800 Depreciation for 2021 = ($220.800-$13,800)*25% = $51,750