Question

Super Saver Groceries purchased store equipment for $35,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 10,000 hours. Super Saver used the equipment for 1,700 hours the first year

Required: Calculate depreciation expense of the equipment for the first year, using each of the following methods. (Do not round your intermediate calculations.)
1. Straight-line. Depreciation expense
2. Double-declining-balance. Depreciation expense
3. Activity-based. epreciation expense

Answer 1

The results are below.

Step-by-step explanation:

Giving the following information:

Purchasing price= $35,500

Useful life= 10 years

Salvage value= $3,500

The company expects to use the equipment for a total of 10,000 hours. Super Saver used the equipment for 1,700 hours the first year

1) Straight-line method:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (35,500 - 3,500)/10

Annual depreciation= $3,200

2) Double-declining balance:

Annual depreciation= 2*[(book value)/estimated life (years)]

Annual depreciation= 2*3,200

Annual depreciation= $6,400

3) Activity-based:

Annual depreciation= [(original cost - salvage value)/useful life of production in hours]*hours operated

Annual depreciation= (32,000/10,000)*1,700

Annual depreciation= $5,440