On March 31, 2018, Canseco Plumbing Fixtures purchased equipment for $42,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The company expects the machine to operate for 10,000 hours. a. Calculate depreciation expense for 2018 and 2019 using straight line method. b. Calculate depreciation expense for 2018 and 2019 using sum-of-the-years'-digits method. c. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.

a). Depreciation expense for 2018=$6,375, and depreciation expense for 2019=$8,500 using the straight line method

b). Depreciation expense for 2018 is $10,200, and 2019 is also $10,200 using sum-of-the-years'-digits method

c). Depreciation expense for 2018 is $15,750 and the depreciation expense for 2019 is $13,125 using double-declining balance method

Explanation:

The expression for the depreciable cost is as follows;

depreciable cost=Acquisition cost-salvage value

where;

acquisition cost=$42,000

residual value=$8,000

replacing;

depreciable cost=42,000-8,000=$34,000

depreciable cost=$34,000

The annual depreciation can be expressed as;

annual depreciation=depreciable cost/estimated life

where;

depreciable cost=$34,000

estimated life=4 years

replacing;

annual depreciation=34,000/4=8,500

annual depreciation=$8,500

Depreciation expense for 2018 = (9/12) * 8,500=$6,375, since its from March 31, 2018 to end the end of 2018

Depreciation expense for 2019=$8,500

b). sum of year's digit depreciation={4 (4+1) }/2=10

This formula yields is equal to the sum of each year of the estimated useful life:

1 + 2 + 3 + 4=10

For;

2018 which is the first year, depreciation expense = (4/10) * depreciable base=0.4*34,000=$13,600 but since its not a full year;

partial depreciation expense for 2018 = (9/12) * 13,600=$10,200

2019 = (3/10) * 34,000=$10,200

c).

depreciation rate = (annual depreciation/depreciable cost) * 100

depreciation rate = (8,500/34,000) * 100=25%

double declining depreciation rate=25%*2=50%

First year depreciation, 2018=42,000*50% * (9/12) = $15,750

Second year depreciation, 2019 = (42,000-15,750) * 50%=$13,125

Depreciation expense for 2018=$15,750

Depreciation expense for 2019=$13,125