Answer:
1. $2,700
2. $6,000
3. $1,836
Explanation:
The computation of the depreciation expense for the first year is shown below:
1) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
= ($12,000 - $1,200) ÷ (4 years)
= ($10,800) ÷ (4 years)
= $2,700
In this method, the depreciation is same for all the remaining useful life
2) 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 $12,000, so the depreciation is $6,000 after applying the 50% depreciation rate
3) Units-of-production method:
= (Original cost - residual value) ÷ (estimated machine hours)
= ($12,000 - $1,200) ÷ ($10,000 hours)
= ($10,800) ÷ ($10,000 hours)
= $1.08 per hour
Now for the first year, it would be
= Machine hours in first year × depreciation per hour
= 1,700 machine hours × $1.08
= $1,836
