Reference no: EM133149627

Question - On August 1, 2022, Dodd Corporation purchased a piece of manufacturing equipment costing $70,000. In addition, on August 1st, Dodd paid $600 in sales tax, $400 to insure the equipment during transit/delivery, $1,000 to have it assembled upon delivery, and $3,000 for pre-paid future routine maintenance.

The useful life of the equipment is estimated to be 8 years or 50,000 hours. At the end of its useful life the equipment is expected to have a residual value of $7,000. The equipment was operated for 2,000 hours in 2022. The company's fiscal year is the calendar year. Dodd depreciates its manufacturing equipment using the units-of-activity method.

Required -

a. Prepare 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 on August 1 st.

b. Prepare a detailed calculation of the depreciation expense to record on the equipment in fiscal 2022.