Answer:
1. $2,100
2. $5,000
3. $3,360
Explanation:
The computation of the depreciation expense for the first year is shown below:
a) Straight-line method:
= (Original cost - residual value) ÷ (service life)
= ($25,000 - $4,000) ÷ (10 years)
= ($21,000) ÷ (10 years)
= $2,100
In this method, the depreciation is same for all the remaining useful life
(b) Double-declining balance method:
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 10
= 10
Now the rate is double So, 20%
In year 1, the original cost is $25,000, so the depreciation is $5,000 after applying the 20% depreciation rate
(c) Activity based method:
= (Original cost - residual value) ÷ (estimated production hours)
= ($25,000 - $4,000) ÷ ($10,000 hours)
= ($21,000) ÷ ($10,000 hours)
= $2.10 per hours
Now for the first year, it would be
= Production hours in first year × depreciation per hours
= 1,600 hours × $2.10
= $3,360
