Scott Company purchased equipment for $250,000 on October 1, 2014. It is estimated that the equipment will

Question:

Scott Company purchased equipment for $250,000 on October 1, 2014. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $50,000. Estimated production is 20,000 units and estimated working hours 10,000. During 2014 Scott uses the equipment for 900 hours, and the equipment produces 1,500 units.

Instructions

Compute depreciation expense under each of the following methods. Scott 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...