Question
eBook Exercise 8-19 Depreciation Methods and Taxes On January 1, 2012, Scout Manufacturing purchased new equipment for $145,000. The equipment was estimated to have a
eBook
Exercise 8-19 Depreciation Methods and Taxes
On January 1, 2012, Scout Manufacturing purchased new equipment for $145,000. The equipment was estimated to have a five-year useful life and a salvage value of $15,000. Scout estimates that the equipment will produce 81,250 units over its useful life. However, it actually produces 18,000 units in 2012, 17,500 units in 2013, 17,750 units in 2014, 17,000 units in 2015, and 15,000 units in 2016.
Required:
a. Prepare a depreciation schedule for Scout for each of the five years using the straight-line method, the double-declining-balance method, and the units-of-activity method.
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To calculate depreciation expense under the double-declining-balance method, calculate the rate of depreciation by taking the straight-line rate of depreciation and doubling it. The double-declining balance uses the book value instead of the depreciable cost in the computation of depreciation expense or [Depreciation expense = (Straight line rate x 2) x (Cost Accumulated Depreciation)]. Remember that Accumulated Depreciation at beginning of the 1st year is zero. Keep in mind that the final net book value for the schedule should be equal to the salvage value.
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b. Assuming a tax rate of 30%, how much more could Scout defer in taxes in the first year by using the double-declining-balance method versus the straight-line method? $
Please Show me how to solve double declining balance method and units of activity method.
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