Depreciation expenses using Straight line is $11,000
Depreciation expenses using Double-declining balance is $18,400
Depreciation expenses using Units of production is $12,500
Straight-line method of depreciation is regarded as the simplest form of depreciation
The formula for this method is
{[Purchase value of equipment - Estimated residual value) / Estimated service life}
Given information
Purchase value of equipment = $115,000
Estimated residual value = $5,000
Estimated service life = 10
Depreciation expenses = ($115,000 - $5,000) / 10 years
Depreciation expenses = $110,000 / 10
Depreciation expenses = $11,000
Double-declining balance method is an accelerated depreciation method where asset are depreciated at twice the rate in the straight-line method
Depreciation rate = 1 / Estimated service life
Depreciation rate = 1 / 10
Depreciation rate = 10%
So, the rate is double = 10% * 2 = 20%
In year 1, the original cost is $115,000, Depreciation = $23,000 after applying the 20% depreciation rate
in year 2, Depreciation = ($115,000 - $23,000) * 20%
Depreciation = $18,400
Formula for Units-of-production method is
(Purchase value of equipment - estimated residual value) / Estimated production units
Units-of-production method = [$115,000 - $5,000] / $220,000 units
Units-of-production method = $110,000 / 220,000 units
Units-of-production method = $0.5 per units
For 2021, Depreciation = Production units in 2021 year * Depreciation per unit
Depreciation = 30,000 units × $0.5
Depreciation = $15,000
For 2022, Depreciation = Production units in 2022 year * Depreciation per unit
Depreciation = 25,000 units * $0.5
Depreciation = $12,500
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