Answer:
1. $11,000 each year
2. $23,000 and $18,400
3. $15,000 and $12,500
Explanation:
The calculation of the depreciation expense for the 2021 and 2022 is shown below:
1. Straight-line method:
= (Purchase value of equipment - estimated residual value) ÷ (estimated service 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 i.e for 2021 also the same depreciation is applied i.e $11,000
2. Double-declining balance method:
First we have to determine the depreciation rate which is
= One ÷ estimated service life
= 1 ÷ 10
= 10%
Now the rate is double So, 20%
In year 1, the original cost is $115,000, so the depreciation is $23,000 after applying the 20% depreciation rate
And, in year 2, the $(115,000 - $23,000) × 20% = $18,400
3. Units-of-production method:
= (Purchase value of equipment - estimated residual value) ÷ (estimated production units)
= ($115,000 - $5,000) ÷ ($220,000 units)
= ($110,000) ÷ (220,000 units)
= $0.5 per units
For 2021, it would be
= Production units in 2021 year × depreciation per unit
= 30,000 units × $0.5
= $15,000
Now for the 2022, it would be
= Production units in 2022 year × depreciation per unit
= 25,000 units × $0.5
= $12,500
