Answer:
a. $5,000
b. $5,500
c. $6,000
Explanation:
The computation of the depreciation expense for the second year is shown below:
a) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
= ($22,000 - $2,000) ÷ (4 years)
= ($20,000) ÷ (4 years)
= $5,000
In this method, the depreciation is same for all the remaining useful life
(b) Double-declining balance method:
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 4
= 25%
Now the rate is double So, 50%
In year 1, the original cost is $22,000, so the depreciation is $11,000 after applying the 50% depreciation rate
And, in year 2, the $11,000 × 50% = $5,500
(c) Units-of-production method:
= (Original cost - residual value) ÷ (estimated production)
= ($22,000 - $2,000) ÷ ($100,000 miles)
= ($20,000) ÷ ($100,000 miles)
= $0.2 per miles
Now for the second year, it would be
= Production units in second year × depreciation per miles
= 30,000 miles × $0.2
= $6,000
