Answer:
Check Explanation.
Explanation:
(1). The straight-line method: the general clue with this method is that in the two years, depreciation is the same. The formula for Calculating depreciation is given below;
straight-line method = (cost - Residual value)/ useful life in years.
From the question we know that the cost of acquisition is $30,000,000, the residual value of the asset is $4,000,000 and useful life is 7 years. Therefore;
straight-line method = ($30,000,000 - $4,000,000)/ 7.
= $3, 714,285.71 Per year.
That is $3, 714,285.71 for 2018 and 2019.
(2).Units of production (UOP) = (cost - Residual value)/ useful life in units.
= ($30,000,000 - $4,000,000)/ 4,375, 000.
Units of production (UOP) = $6 per mile.
Hence, the depreciation in 2018 = Depreciation per unit × 2018 year usage.
= 6 × 1,100,000 mile.
= $6,600,000.
depreciation in 2019 = Depreciation per unit × 2019 year usage.
= 6 × 1,200,000.
= $7,200,000.
Double-declining-balance (DDB)= (cost - accumulated depreciation) × 2 × 1/(useful life years).
Double-declining-balance (DDB) = (30,000,000 - 0)× 2 × (1/7).
= $8,571,428.57 depreciation in 2018.
= $8,571,428.6 depreciation in 2018
Double-declining-balance (DDB) = (30,000,000 - 8,571,428.57) × 2 × 1/7.
= $6,122,449.00 depreciation in 2019.
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Total depreciation for straight-line method(2018 and 2019) = $7,428,571.42.
Total depreciation for Units of production (UOP)(2018 and 2019) = $13,800,000.
Total depreciation for Double-declining-balance (DDB)= $ 14,693,877.6.
