Question

A machine costing $207,400 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 476,000 units of product during its life. It actually produces the following units: 121,500 in Year 1, 123,500 in Year 2, 121,300 in Year 3, 119,700 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 1

Straight-Line Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciable		Useful Life		Depreciation	Accumulated	Book
year	Cost	Cost				Expense	Depreciation	Value
year-1	$207,400.00
year-1		$190,400.00	/	4	=	$47,600.00	$47,600.00	$159,800.00
year-2		$190,400.00	/	4	=	$47,600.00	$95,200.00	$112,200.00
year-3		$190,400.00	/	4	=	$47,600.00	$142,800.00	$64,600.00
year-4		$190,400.00	/	4	=	$47,600.00	$190,400.00	$17,000.00
Depreciable cost =207400-17000
Depreciation per Unit = (Original Cost- Salvage Value)/ Estimated Unit							0.4
=(207400-17000)/476000 Unit=$0.40
Units-of-Production Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciation		Number of		Depreciation	Accumulated	Book
Date	Cost	Per Unit		Unit		Expense	Depreciation	Value
year-1	$207,400
year-1		0.4	x	121500	=	$48,600	$48,600	$158,800.00
year-2		0.4	x	123500	=	$49,400	$98,000	$109,400.00
year-3		0.4	x	121300	=	$48,520	$146,520	$60,880.00
year-4 (207400-17000-146520)						$43,880	$190,400	$17,000.00
Double-Declining-Balance Depreciation Schedule
		Depreciation for the Year
	Asset	Book		DDB		Depreciation	Accumulated	Book
Date	Cost	Value		Rate		Expense	Depreciation	Value
year-1	$207,400
year-1		$30,000	x	50%	=	$15,000	$15,000	$192,400
year-2		$192,400	x	50%	=	$96,200	$111,200	$96,200
year-3		$96,200	x	50%	=	$48,100	$159,300	$48,100
year-4 (207400-17000-159300)						$31,100	$190,400	$17,000
DDB Rate= 1/ Estimated Life X 2= 1/4X2= 50%