Answer:
a.
Year 1 = $34,200
Year 2 = $34,200
Year 3 = $34,200
Total = $102,600
b.
Year 1 = $41,040
Year 2 = $30,780
Year 3 = $30,780
Total = $102,600
c.
Year 1 = $71,993
Year 2 = $24,002
Year 3 = $6,605
Total = $102,600
Explanation:
Straight Line Method
Depreciation Expense = Cost - Residual amount ÷ Estimated useful life
therefore,
Depreciation Expense = ($108,000 - $5,400) ÷ 3 = $34,200
This charge will be the same from Year 1 through Year 3 because its straight line !
Units-of-activity method
Depreciation Charge = Activity rate x activity during the period
where,
Activity rate = Cost - Residual amount ÷ Estimated operating hours
= ($108,000 - $5,400) ÷ 27,000 hours
= $3.80
Year 1
Depreciation Charge = $3.80 x 10,800 hours = $41,040
Year 2
Depreciation Charge = $3.80 x 8,100 hours = $30,780
Year 3
Depreciation Charge = $3.80 x 8,100 hours = $30,780
Double Declining Balance Method
Depreciation Charge = 2 x SLDP X BVSLDP
where,
SLDP = 100 ÷ number of years
= 100 ÷ 3
= 33.33 %
Year 1
Depreciation Charge = 2 x 33.33 % x $108,000
= $71,992.80
Year 2
Depreciation Charge = 2 x 33.33 % x ($108,000 - $71,992.80)
= $24,002
Year 3
Depreciation Charge = 2 x 33.33 % x ($108,000 - $71,992.80 - $24,002)
= $8,002.67
However
In Year 3 depreciation will decrease the book value of the asset below its salvage value :
Do the Test :
Year 2 Book Value $12,005
Less Year 3 Depreciation ($8,003)
Year 3 Book Value $4,002
With double-declining-balance method, Depreciation will only be allowed to the point where :
Book Value = Salvage amount
Therefore, Depreciation for year 3 will be :
Year 2 Book Value $12,005
Less Salvage amount ($5,400)
Year 3 Depreciation $6,605
