Answer:
Instructions are below.
Explanation:
Giving the following information:
Purchase price= $18,000
Residual value= $1,800
Useful life= 4 years
The machine operated for 2,300 hours in the first year, and the company expects the machine to operate for a total of 15,000 hours.
To calculate the depreciation expense, we need to use the following formulas:
<u>Straight-line:</u>
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (18,000 - 1,800)/4= $4,050
<u>Double-declining balance:</u>
Annual depreciation= 2*[(book value)/estimated life (years)]
Annual depreciation= 2* 4,050= $8,100
<u>Activity-based:</u>
Annual depreciation= [(original cost - salvage value)/useful life of production in hours]*hours operated
Annual depreciation= [(18,000 - 1,800)/15,000]*2,300
Annual depreciation= $2,484
