Answer:
Straight line depreciation expense
Year 1 = $27,500
Year 2, 3 ,4 = $41,250
Double declining method
Year 1: $60,000
Year 2: $60,000
Year 3: $30,000
Year 4: $15,000
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
( $180,000 - $15,000) / 4 = $41,250
Depreciation expense every year would be 41250 expect in year 1 when the machine was used for only 8 months.
To determine the deprecation expense in the 1st year, determine the monthly deprecation expense.
41250 / 12 = 3,437.50
Depreciation for 1 st year = 3,437.50 x 8 = $27,500
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life)
2 / 4 = 0.5
Depreciation expense in year one = 0.5 x $180,000 = $90,000
The same procedure for determining depreciation expense in year 1 under straight line depreciation would also be used here.
90,000 / 12 = $7,500
$7,500 x 8 = $60,000
Book value at the beginning of year 2 = $180,000 - $60,000 = $120,000
Depreciation expense in year 2 = 0.5 x $120,000 = $60,000
Book value at the beginning of year 3 = $120,000 - $60,000 = $60,000
Depreciation expense in year 3 = 0.5 x $60,000 = $30,000
Book value at the beginning of year 4 =$60,000 - $30,000 = $30,000
Depreciation expense in year 4 = 0.5 x $30,000 = $15,000
I hope my answer helps you
