Explanation:
The computation of the depreciation expense for the first year and the second year is shown below:
a) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
= ($3,900 - $300) ÷ (4 years)
= ($3,600) ÷ (4 years)
= $900
In this method, the depreciation is same for all the remaining useful life
So, in year 2 the depreciation expense is also $900
(b) 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 $3,900, so the depreciation is $1,950 after applying the 50% depreciation rate
And, in year 2, the $1,950 × 50% = $975
