Answer:
1) Using straight line method
, depreciation for first year is $4,000
2) Using double declining balance
, depreciation for first year is $8,900
3) Using activity based method, depreciation for first year is $5,600
Explanation:
Given:
Cost = $44,500
Useful life = 10 years
Salvage value = $4,500
Useful life in hours = 10,000 hours
Super Saver used the equipment for 1,400 hours the first year.
1) Straight line method
Depreciation for first year = (cost - salvage value) ÷ useful life
= $(44,500 - 4,500) ÷ 10
= $4,000 per year
2) Double declining balance
Depreciation rate = (100 ÷ useful life) × 2
= (100 ÷ 10) × 2
= 20%
Depreciation for first year = $44,500 × 20%
= $8,900
3) Activity based
Rate = cost - salvage value ÷ useful life in hours
= ($44,500 - $4,500) ÷ 10,000
= 4 per hour
Depreciation for first year = 1,400 × 4
= $5,600
