Solution:
Depreciation Expense per year and total depreciation:
Year | Straight-Line Method | Units-of-Output Method | Double-Declining-Balance Method |
2015 | $ 71,250 | $ 102,600 | $ 160,000 |
2016 | $ 71,250 | $ 91,200 | $ 80,000 |
2017 | $ 71,250 | $ 62,700 | $ 40,000 |
2018 | $ 71,250 | $ 28,500 | $ 5,000 |
Totals | $ 285,000 | $ 285,000 | $ 285,000 |
Notes:
1) Straight-Line Method Depreciation = ( Cost - Salvage Value) / Number of years
= ( $ 320,000 - $ 35,000) / 4 years = $71,250.
2) Units-of-Output Method
Year | Units-of-Output Depreciation | Units | Calculation |
2015 | $ 102,600 | 7,200 | (320000-35000)/20000 hrs * 7200 hrs |
2016 | $ 91,200 | 6,400 | (320000-35000)/20000 hrs * 6400 hrs |
2017 | $ 62,700 | 4,400 | (320000-35000)/20000 hrs * 4400 hrs |
2018 | $ 28,500 | 2,000 | (320000-35000)/20000 hrs * 2000 hrs |
Totals | $ 285,000 | 20,000 |
3) Double-Declining-Balance Method:
Year | Opening Balance | Depreciation | Accumulated Depreciation | Closing Balance |
2015 | $ 320,000 | $ 160,000 | $ 160,000 | $ 160,000 |
2016 | $ 160,000 | $ 80,000 | $ 240,000 | $ 80,000 |
2017 | $ 80,000 | $ 40,000 | $ 280,000 | $ 40,000 |
2018 | $ 40,000 | $ 5,000 | $ 285,000 | $ 35,000 |
Under double declining method, depreciation is calculation as follows:
Depreciation Rate = 1/ useful life * 2 = (1 / 4) * 2 = 50% per year on opening balance.
Salvage is considered in the end and adjust the last year depreciation based on salvage value
2018 Depreciation Expense = 2018 Opening Balance - Salvage Value = $ 40,000 - $ 35,000 = $ 5,000.
Disclaimer:
1) Around $1 differences will be there because of rounding off.
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