Explanation:
The computation of the depreciation expense for the year 2016 and year 2017 is shown below:
1) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
= ($115,000 - $5,000) ÷ (10 years)
= ($110,000) ÷ (10 years)
= $11,000
In this method, the depreciation is same for all the remaining useful life
So for 2016 and 2017, the depreciation is $11,000
2. The sum of the years digits is
For 2016
= $110,000 × 10 ÷ 55
= $20,000
For 2017
= $110,000 × 9 ÷ 55
= $18,000
The 55 is come from
= 10 years + 9 years + 8 years + 7 years + 6 years + 5 years + 4 years + 3 years + 2 years + 1 years
= 55
3. Double-declining balance method:
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 10
= 10
Now the rate is double So, 20%
In year 2016, the original cost is $115,000, so the depreciation is $23,000 after applying the 20% depreciation rate
And, in year 2017, the ($115,000 - $23,000) × 20% = $18,400
4. Under the one hundred fifty percent declining method
We considered 15 percent
In year 2016, the original cost is $115,000, so the depreciation is $17,250 after applying the 15% depreciation rate
And, in year 2017, the ($115,000 - $17,250) × 15% = $14,662.50
5. Units-of-production method:
= (Original cost - residual value) ÷ (estimated production)
= ($115,000 - $5,000) ÷ ($220,000 units)
= ($110,000) ÷ ($220,000 units)
= $0.5 per units
For the year 2016, it is
= Production units in 2016 year × depreciation per unit
= 30,000 × $0.5
= $15,000
Now for the 2017 year, it would be
= Production units in 2017 year × depreciation per unit
= 25,000 × $0.5
= $12,500
