Answer:
1. Straight-line Depreciation:
To calculate straight-line depreciation, we need to subtract the estimated residual value from the initial cost and divide it by the estimated service life.
Depreciation per year = (Initial cost - Residual value) / Service life
For 2013:
Depreciation for 2013 = ($260,000 - $20,000) / 6 = $40,000
For 2014:
Depreciation for 2014 = ($260,000 - $20,000) / 6 = $40,000
2. Sum-of-the-Years' Digits Depreciation:
To calculate sum-of-the-years' digits depreciation, we need to find the sum of the digits of the years of the asset's useful life.
Sum of the digits = n(n+1)/2, where n is the number of years of useful life.
For the given equipment, n = 6.
Sum of the digits = 6(6+1)/2 = 21
For 2013:
Depreciation for 2013 = (Remaining useful life / Sum of the digits) * (Initial cost - Residual value)
Depreciation for 2013 = (6 / 21) * ($260,000 - $20,000) = $20,000
For 2014:
Depreciation for 2014 = (Remaining useful life / Sum of the digits) * (Initial cost - Residual value)
Depreciation for 2014 = (5 / 21) * ($260,000 - $20,000) = $19,048
3. Double-Declining Balance Depreciation:
To calculate double-declining balance depreciation, we use a depreciation rate that is double the straight-line depreciation rate.
Depreciation rate = (2 / Service life) * 100
For 2013:
Depreciation for 2013 = (Depreciation rate / 100) * (Initial cost - Accumulated depreciation)
Depreciation rate = (2 / 6) * 100 = 33.33%
Depreciation for 2013 = 33.33% * ($260,000 - $0) = $86,667
For 2014:
Depreciation for 2014 = (Depreciation rate / 100) * (Initial cost - Accumulated depreciation)
Depreciation for 2014 = 33.33% * ($260,000 - $86,667) = $57,778
Please note that for subsequent years, the accumulated depreciation from the previous years needs to be considered when calculating depreciation.
Explanation: