Answer:
- The depreciation expense by straight-line for 2020: $206,025
- The depreciation expense by double-declining balance for 2021: $619,000
- The depreciation expense by sum-of-the-years'-digits for 2021: $329,640
Explanation:
Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($1,238,000 - $139,200) / 4 years = $274,700 yearly depreciation expense.
Depreciation expense by straight-line for 2020 will be (April 1, 2020 - Dec. 31, 2020): $274,700 / 12 x 9 = $206,025.
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/4 years = 25%, then 25% multiplied by 2 to give 50% or simply 1/2
Depreciation expense under double-declining method at December 31, 2021: $1,238,000 x 1/2 = $619,000
Under the sum-of-the-years'-digits, the depreciation expense for 2021 will be calculated as follows: 3 / 10 = 30%.
10 was derived by 4 + 3 + 2 + 1 for Year 2020, 2021, etc
($1,238,000 - $139,200) x 30% = $329,640
