Depreciation:

Encino Corporation purchased equipment costing $118,000 on August 1, 2013. The equipment has an estimated useful life of eight (8) years with an estimated salvage of $10,000. Encino has a December 31 year-end. Calculate the following, showing all of your computations well-labeled and in good form under each of the following independent scenarios:

1. The equipment is depreciated using machine hours. The machine is expected to be used for a total of 110,000 hours over it estimated useful life. The following hours of usage were recorded in 2013, 2014, and 2015:

2013 6,000 hours

2014 13,000 hours

2015 12,000 hours

Instructions:

(a) Calculate the depreciation for 2014 using the above data. Round to the nearest hundredth.

(b) Calculate the book value on the machine at December 31, 2015.

2. The equipment is depreciated using the straight-line method.

Instructions:

(a) Calculate the depreciation for 2014 using the above data.

(b) Calculate the book value on the machine at December 31, 2016.

3. The equipment is depreciated using the sum-of-the-years