Answer:
a. $3,000 ; $4,000
b. $7,500 ; $8,125
Explanation:
The computation of the depreciation expense under each method is shown below:
a) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
For year 1
= ($40,000 - $8,000) ÷ (8 years)
= ($32,000) ÷ (4 years)
= $4,000
In the first year, the nine months depreciation would be charged
= $4,000 × 9 months ÷ 12 months
= $3,000
The 9 months is calculated from April 1 to December 31
In this method, the depreciation is same for all the remaining useful life
So, in year 2, the depreciation expense is $4,000
(b) Double-declining balance method:
First we have to find the depreciation rate which is shown below:
= Percentage ÷ useful life
= 100 ÷ 8
= 12.5%
So, the rate would be double i.e 25%
In year 1, the original cost is $40,000, so the depreciation expense is
= $40,000 × 25% × 9 months ÷ 12 months
= $7,500
The 9 months is calculated from April 1 to December 31
And, in year 2, the depreciation expense would be
= ($40,000 - $7,500) × 25%
= $8,125
