Question

A machine costing $210,600 with a four-year life and an estimated $15,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 489,000 units of product during its life. It actually produces the following units: 121700 in Year 1 123.400 in Year 2, 120,700 in Year 3, 133 200 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: on method. Compute depreciation for each year (and total depreciation of all years combined) for the machine under (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole doller 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 Straight-line depreciation Straight Line Depreciation Year Depreciation

Answer 1

Straight-line Depreciation Method:

Cost of Machine = $210,600
Salvage Value = $15,000
Useful Life = 4 years

Annual Depreciation = (Cost of Machine - Salvage Value) / Useful Life
Annual Depreciation = ($210,600 - $15,000) / 4
Annual Depreciation = $48,900

Straight-Line Depreciation Depreciation Year Expense 48900 1 2 48900 48900 3 48900 Total 195600

Units of Production Depreciation Method:

Cost of Machine = $210,600
Salvage Value = $15,000
Useful Life = 489,000 units

Depreciation per unit = (Cost of Machine - Salvage Value) / Useful Life
Depreciation per unit = ($210,600 - $15,000) / 489,000
Depreciation per unit = $0.40

Year 1 2 3 Units of Production Depreciable Depreciation Units per unit 121700 0.40 123400 0.40 120700 0.40 123200 0.40 489000 Depreciation Expense 48680 49360 48280 49280 195600 Total

Double-declining Depreciation Method:

Useful Life = 4 years

Double-declining Depreciation Rate = 2 / Useful Life
Double-declining Depreciation Rate = 2 / 4
Double-declining Depreciation Rate = 50%

DDB Depreciation for the Period Beginning-Year Depreciation Annual Book Value Rate Depreciation $ 210,600 50% $ 105,300 $ 105,300 50% $ 52,650 $ 52,650 50% $ 26,325 26,325 $ 11,325 $ 195,600 End of Period Accumulated Year-End Book Depreciation Value $ 105,300 $ 105,300 $ 157,950 $ 52,650 $ 184,275 $ 26,325 $ 195,600 $ 15,000 Total