Young was a purchasing agent for Wilson, a sole proprietor. Young had the express authority to place purchase orders with Wilson's suppliers. Young conducted business through the mail and had little contact with Wilson. Young placed an order with Vanguard, Inc., on Wilson's behalf after Wilson was declared incompetent in a judicial proceeding. Young was aware of Wilson's incapacity. The applicable law is based on the Restatement (Second) of the Law of Agency. With regard to the contract with Vanguard, Wilson (or Wilson's legal representative) will

A. Not be liable because Vanguard dealt only with Young.
B. Not be liable because Young did not have authority to enter into the contract.
C. Be liable because Vanguard was unaware of Wilson's incapacity.
D. Be liable because Young acted with express authority.

a. $9,000

b. $22,000 and $11,000

c. $5,220 and $6,660

Explanation:

The computation of the depreciation expense for the two years are shown below:

a) Straight-line method:

= (Original cost - residual value) ÷ (useful life)

= ($44,000 - $8,000) ÷ (4 years)

= ($36,000) ÷ (4 years)  

= $9,000

In this method, the depreciation is same for all the remaining useful life

So, in year 2021 and 2022, the depreciation expense would be $9,000

(b) Double-declining balance method:

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 4

= 25%

Now the rate is double So, 50%

In year 2021, the original cost is $44,000, so the depreciation is $22,000 after applying the 50% depreciation rate

And, in year 2022, the $22,000 × 50% = $11,000 . The $22,000 is come from $44,000 - $22,000

(c) Units-of-production method:

= (Original cost - residual value) ÷ (estimated production)  

= ($44,000 - $8,000) ÷ (20,000 hours)

= ($36,000) ÷ (20,000 hours  

= $1.8 per hours

For the 2021, it would be

= Production hours in 2021 year × depreciation per hour

= 2,900 hours × $1.8

= $5,220

Now for the 2022 year, it would be  

= Production hours in 2022 year × depreciation per hour

= 3,700 hours × $1.8

= $6,660