Question

A machine costing $216,200 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 493,000 units of product during its life. It actually produces the following units: 122,600 in Year 1, 122,600 in Year 2, 121,000 in Year 3, 136,800 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.) 1.42 points Required: eBook 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.) Print 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 Expense Total Straight Line Units of Production >

Answer 1

1	Straight line method
	Useful life	4
	Machine cost	216,200
	Salvage value	19,000
	Net cost	197,200
	Yearly depreciation under straight line method	49,300
	years	Dep expense
	year 1	49,300
	year 2	49,300
	year 3	49,300
	year 4	49,300
2	Units of production method
	Years	Units of production	Estimated production	Balance capacity unutilised by end of year	Depreciation
	year 1	122,600	493,000	370,400	49,040.00
	year 2	122,600		247,800	49,040.00
	year 3	121,000		126,800	48,400.00
	year 4	136,800		(10,000)	50,720.00
		503,000			197,200
	Year 4 will be balancing figure as the actual production exceeded the estimated production
	Net cost - depreciation for all the 3 years
	Depreciation will be	Machine cost - salvage value/estimated production*actual production for the year
3	Double declining method
	Years	Book Value	Depreciation%	Depreciation	Net Book Value
	year 1	216,200	50%	108,100	108,100
	year 2	108,100	50%	54,050	54,050
	year 3	54,050	50%	27,025	27,025
	year 4	27,025	29.70%	8,026	18,999
	year 4 depreciation % calculation
	Salvage value	70.31	29.69%
	Book value in year 4
	Because year 4 depreciaiton cannot exceed salvage value