Determine the depreciation expense for 2018 and 2019 using the following methods: (a) Straight-line (SL), (b) Units of production (UOP), and (c) Double-declining-balance (DDB). For each method (starting with (a) the straight-line method), select the appropriate formula needed to compute annual depreciation and then determine depreciation expense under that method for 2018 and 2019. (Round any depreciation expense per unit amounts to the nearest cent and all other amounts to the nearest

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Explanation:

(1). The straight-line method: the general clue with this method is that in the two years, depreciation is the same. The formula for Calculating depreciation is given below;

straight-line method = (cost - Residual value)/ useful life in years.

From the question we know that the cost of acquisition is $30,000,000, the residual value of the asset is $4,000,000 and useful life is 7 years. Therefore;

straight-line method = ($30,000,000 - $4,000,000)/ 7.

= $3, 714,285.71 Per year.

That is $3, 714,285.71 for 2018 and 2019.

(2).Units of production (UOP) = (cost - Residual value)/ useful life in units.

= ($30,000,000 - $4,000,000)/ 4,375, 000.

Units of production (UOP) = $6 per mile.

Hence, the depreciation in 2018 = Depreciation per unit × 2018 year usage.

= 6 × 1,100,000 mile.

= $6,600,000.

depreciation in 2019 = Depreciation per unit × 2019 year usage.

= 6 × 1,200,000.

= $7,200,000.

Double-declining-balance (DDB)= (cost - accumulated depreciation) × 2 × 1/(useful life years).

Double-declining-balance (DDB) = (30,000,000 - 0)× 2 × (1/7).

= $8,571,428.57 depreciation in 2018.

= $8,571,428.6 depreciation in 2018

Double-declining-balance (DDB) = (30,000,000 - 8,571,428.57) × 2 × 1/7.

= $6,122,449.00 depreciation in 2019.

Total depreciation for straight-line method(2018 and 2019) = $7,428,571.42.

Total depreciation for Units of production (UOP)(2018 and 2019) = $13,800,000.

Total depreciation for Double-declining-balance (DDB)= $ 14,693,877.6.

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