Question

Having trouble with the last one

A machine costing $212,000 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 480,000 units of product during its life. It actually produces the following units: 123,100 in Year 1, 123,100 in Year 2, 121,300 in Year 3, 122,500 in Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate-this difference was not predicted. (The machine cannot be depreciated below its estimated salvage value.) Required: Compute depreciation for each year (and total depreciation 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.) Answer is complete but not entirely correct. 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 the Double- declining-balance. End of Period Year Accumulated Depreciation Book Value DDB Depreciation for the Period Beginning of Period Depreciation Depreciation Book Rate Expense Value $ 212,000 50 % $ 106,000 106,000 50 % 53,000 53,000 50 % / 26,500 26,500 50 % 9,275 $ 194,775 $ $ 2 106,000 159.000 185,500 194,775 106,000 53,000 26,500 17,225 Total < Units of Production DDB >

Answer 1

26,500 192,000 20,000 6,500 $ 192,000 Total

Guidance for the last one:

Straight-line rate = (1 / Life years) × 100

                            = 100 / 4

                            = 25%

Double declining (DB) rate = Straight-line rate × 2

                                    = 25% × 2

                                    = 50%

This rate is applicable on the beginning book value in each year (1 to 3) in order to get depreciation expense of that year.

In the 4^th year:

Ending book value should be established first; this should be the amount of salvage value, which is $20,000. Once this is established, depreciation expense would be the difference between beginning and ending book values.

Depreciation expense = Ending book value – Beginning book value

                                    = 26,500 – 20,000

                                    = $6,500

The DB rate is not applicable here, since the depreciation expense appears as a balancing figure.

Accumulated depreciation = 185,500 + 6,500

                                                = 192,000.

This is equal to total of depreciation expenses from year 1 to year 4.

Checking:

Accumulated depreciation = Total depreciation expense = Cost – Salvage value = 212,000 – 20,000 = 192,000.