Answer and Explanation:
A. The computation of he depreciation for the current fiscal year and for the following fiscal year using the straight-line method is shown below:-
= (Original cost - residual value) ÷ (estimated useful life)
= ($105,000 - $12,000) ÷ (10 years)
= $9,300
For the current year, the depreciation expense is
= $9,300 × 8 months ÷ 12 months
= $6,200
The 8 months are calculated from May 1 to December 31
And, for the following fiscal year , the depreciation expense is $9,300
B. The computation of depreciation for the current fiscal year and for the following fiscal year using the double-declining-balance method is shown below:-
But before that
Rate of depreciation under double declining depreciation = 2 × (1 ÷ Life) × 100
= 2 × (1 ÷ 10) × 100
= 20%
1st Year depreciation = Equipment cost × Rate of depreciation under double declining depreciation × Beginning may ÷ Ending December
= $105,000 × 20% × 8 ÷ 12
= $14,000
2nd year depreciation = Depreciation on $105,000 for the four months at 20%
= Equipment cost × Rate of depreciation under double declining depreciation × Remaining months ÷ Ending December
= $105,000 × 20% × 4 ÷ 12
= $7,000
and now we calculate the 20% on balance in machinery for 8 months.
Balance = Equipment cost - 1st Year depreciation - 2nd Year depreciation
= $105,000 - $14,000 - $7,000
= $84,000
Depreciation = Balance Rate of depreciation under double declining depreciation × Beginning may ÷ Ending December
= $84,000 × 20% × 8 ÷ 12
= $11,200
Total depreciation in year 2 = 2nd year depreciation + Depreciation
= $7,000 + $11,200
= $18,200