Answer: A. Depreciation expense Year 3, (SL)= 3600
B. Depreciation expense Year 3, Aug 31 (SL)= 6000
C. Depreciation Expense Year 3, (DDB)= 6000
D. Depreciation Expense Year 3 April 1 (DDB)= 4800
Explanation:
The straight line method of depreciation spreads depreciation over the life of an asset equally each year. In other words, yearly depreciation is fixed.
It is calculated as: SL; Depreciation expense= (Cost-Residual value)/ (lifetime of asset)
A. Depreciation expense= (40000-4000)/5
Depreciation expense= 7200 (yearly depreciation)
7200 is yearly depreciation value;
Depreciation expense in year 3= 7200(6/12), where 6 is the number of months from July 1, year 3 to December 31, year 3.
Depreciation expense in year 3= 3600
B. Depreciation expense= (50000-5000)/5
Depreciation expense= 9000 (yearly depreciation)
9000 is yearly depreciation value;
Depreciation expense in year 3= 9000(8/12), where 8 is the number of months from January 1, year 3 to August 31, year 3.
Depreciation expense in year 3= 6000
The double declining balance method of depreciation works in such a way that higher values of depreciation are deducted in the early years of the asset. It ignores the residual values. It is calculated as:
DDB expense= (DDB%)(Book value)
Where: DDB%= (100%/Lifetime)2
Book value= Cost- Accumulated depreciation
C. DDB%= (100%/5)2
DDB%= 40%
Thus, DDB expense = 40%(60000)
DDB expense = 24000
24000 is one year depreciation, so we have to convert this into 3 months (i.e October1, year3 to December 31, year 3) by multiplying by (3/12)
DDB depreciation expense = 24000(3/12) =6000
D. For explanation of this please find attached file below.
