Question

A machine costing $214,600 with a four year life and an estimated $17,000 salvage life is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 494,000 units of product during its life. It actually produces the following units: 122,800 in 1st year, 123,500 in 2nd year, 120,700 in 3rd year, 137,000 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: 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.)

Chapter 8. Homework x to the McGra X + newconnect.mheducation.com/flow/connect.html Help Save & Exit Submit Saved er 8. Homework You received no credit for this question in the previous attempt. Check my work View previous attempt Problem 8-2A Depreciation methods LO P1 A machine costing $214,600 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 494,000 units of product during its life. It actually produces the following units: 122,800 in 1st year, 123,500 in 2nd year, 120,700 in 3rd year, 137,000 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.) ipped eBook 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.) eferences Complete this question by entering your answers in the tabs below. DDB Units of Production Straight Line Compute depreciation for each year (and total depreciation of all years combined) for the machine under Double-declining- Fnd of Darind balance * Next > / !!! 7 of 8 @SA NR Nenoriation for the Derind < Prev w pe here to search

Answer 1

Answer::

1) Depreciation Under Straight Line Method:

Depreciation Rate = 1$\div$Useful Life = 1$\div$ 4 = 0.25 or 25%

Depreciable Cost = Cost - Salvage Value = $214,600 - $17,000 = $197,600

Depreciation Expense = Depreciable Cost $\times$ Depreciation Rate = 197,600 $\times$ 25% = $49,400

Year	Depreciation Expense
1	$49,400
2	$49,400
3	$49,400
4	$49,400
Total	$197,400

2) Depreciation Under Units of Production Method:

Depreciable Cost = $197,600

Total Estimated Production units during estimated life = 122,800 + 123,500 +120,700 +137,000 = 504,000 units

Depreciation per unit = Depreciable Cost  $\div$ Total estimated production units

= $197,600 $\div$ 504,000 = $0.3926 = $0.39 (as per instructions)

Year	Depreciable unit	Depreciation per unit	Depreciation Expense
1	122,800	0.39	$47,892
2	123,500	0.39	$48,165
3	120,700	0.39	$47,073
4	137,000	0.39	$53,430
Total	504,000		196,560

Note: Due to taking depreciation per unit to two decimal places, the Depreciation expense 197,560 is not equal to $197,600

3) Depreciation Under Double Declining Balance Method:

Double Declining rate = (1$\div$4)$\times$ 2 = 0.5 or 50%

Year	Beg. Book Value	Dep. Rate	Dep. Expense	Acc. Dep.	Book Value
1	$214,600	50%	$107,300	$107,300	$107,300
2	$107,300	50%	$53,650	$160,950	$53,650
3	$53,650	50%	$26,825	$187,775	$26,825
4	$26,825	50%	$ 9,825**	$197,600	$17,000
Total			$197,600		$17,000

** Note: For 4th year depreciation would be the difference of beginning and ending book value of assets.