Given,

Cost = $88,600

Residual value = $3,100

Useful life = 5 years

Depreciable Base = Cost - Residual Value

Depreciable Base = $88,600 - $3,100 = $85,500

 

Computation of Depreciation under Straight Line Method

Depreciation Expense = Depreciable Base * 1/Useful Life

Depreciation Expense = $85,500/5 years = $17,100

Under, the straight-line method, the annual depreciation expense would remain the same throughout the useful life of the asset.

Hence, depreciation expense for year 2 = $17,100

 

Computation of Depreciation under Units of Production Method:

Depreciation Expense  = Depreciable Base * Output of Current Period/Total Expected Output in Useful Years

Estimated output in useful life = 100,000 units

Output of year I = 51,000 units

Output of year 2 = 12,000 units

Depreciation expense year 1 = $85,500 * (51,000/100,000) = $43,605

Depreciation expense year 2 = $85,500 * (12,000/100,000) = $10,260

 

Computation of Depreciation under Declining Balance Method:

Depreciation Expense = Cost * 2 * Rate of Depreciation under straight-line method

Straight line method depreciation rate = 1/5 =20%

Depreciation expense for year 1 = $88,600 * 2 * 20% = $35,440

Depreciation expense for year 2 = Book Value * 2 * 20%

Book value = Cost - Accumulated Depreciation = $88,600 - $35,440 = $53,160

Depreciation expense for year 2 = $53,160 * 2 * 20% = $21,264

 

 

Computation of Depreciation under MACRS Table:

Since the asset is a 5-year class, the applicable depreciation rates for year 1 and year 2 under the MACRS method are 20% and 32%, respectively:

Depreciation expense for Year 1 = Cost * 20%

= $88,600 * 20% = $17,720

 

Depreciation expense for Year 2 = Cost * 32%

= $88,600 * 32% = $28,352