Question

Problem 10-2A Depreciation methods LO P1 A machine costing $209,800 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 477,000 units of product during its life. It actually produces the following units: 121,800 in 1st year, 122,700 in 2nd year, 119,800 in 3rd year, 122,700 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate-this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.) Required: reciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.) Complete this question by entering your answers in the tabs below. Straight Line Units of Production DDB Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line depreciation. Straight-Line Depreciation Depreciation Expense Year 2 Total S 01 < Straight Line Units of Production >

Answer 1

1a.	Straight Line method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value
		=	($209800 - $19000) / 4 years
		=	$                    47,700	per year
	Year	Depreciation expense
	1	$         47,700
	2	$         47,700
	3	$         47,700
	4	$         47,700
	Total	$     1,90,800
1b.	Units of production method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value in hours
		=	($209800 - $19000) / 477000
		=	$                         0.40
		Depreciable units	Depreciation per unit	Depreciation expense
	1	1,21,800	$                         0.40	$             48,720
	2	1,22,700	$                         0.40	$             49,080
	3	1,19,800	$                         0.40	$             47,920
	4	1,12,700	$                         0.40	$             45,080
	Total	4,77,000		$         1,90,800
1c.	Double - declining balance method:-
	Double declining rate	=	(100%/ 4 years) X 2
		=	50%
		Beginning of period book value	Depreciation rate	Depreciation expense	Accumulated depreciation	Book value
	1	$     2,09,800	50%	$         1,04,900	$       1,04,900	$ 1,04,900
	2	$     1,04,900	50%	$             52,450	$       1,57,350	$     52,450
	3	$         52,450	50%	$             26,225	$       1,83,575	$     26,225
	4	$         26,225	50%	$               7,225	$       1,90,800	$     19,000
				(bal fig.)
	Total			$         1,90,800