Question 1 (15 points)

On May 1, 2021 Umbrella Corporation purchased a piece of manufacturing equipment costing $80,000 which includes a 10% sales tax. In addition, on May 1st, Umbrella paid $500 to insure the equipment during transit/delivery, $1,500 to have it assembled upon delivery, and $2,000 for pre-paid future routine maintenance.

The useful life of the equipment is estimated to be 15 years or 40,000 hours. At the end of its useful life the equipment is expected to have a residual value of $4,000. The equipment was operated for 1,700 hours in 2021.

The company's fiscal year is the calendar year. Umbrella depreciates its manufacturing equipment using the units-of-activity method.

Required:

1. Make a detailed calculation of the total cost to be capitalized for the equipment. Note, this amount is the amount of the debit made to the equipment account to record the asset's acquisition.

2. Make a detailed calculation of the depreciation expense to record on the equipment in fiscal 2021.

MUST SHOW ALL YOUR WORK! IF NECESSARY, ROUND AMOUNTS TO NEAREST DOLLAR.