Question

A machine costing $207,800 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 477,000 units of product during its life. It actually produces the following units: 123,400 in Year 1, 124,400 in Year 2, 120,500 in Year 3, 118,700 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.)

Straight Line Units of Production DDB Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Units of production. Units Year Depreciable Units Units of Production Depreciation Expense Depreciation per unit 123,400 124,400 120,500 118,700 Total

Answer 1

Straight line depreciation
(cost - salvage value)/Estimated useful life
(207,800-17000)/4
47700
	Depreciation
year	expense
1	47,700
2	47,700
3	47,700
4	47,700
units of production
Depreciation rate = (207,800-17,000)/477,000
		0.4
	Depreciable	Dep	Depreciation
Year	units	per unit	Expense
1	123,400	0.4	49360
2	124,400	0.4	49760
3	120,500	0.4	48200
4	108,700	0.4	43480
DDB
Rate = 1/4*2
	0.5	or 50%
	Beginning	rate	Dep	Accum'	Book
year			expense	dep	value
1	207,800	50%	103900	103,900	103900
2	103,900	50%	51950	155,850	51,950
3	51,950	50%	25975	181,825	25,975
4	25,975	35%	8,975	190800	17000