Question

A machine costing $207,200 with a four-year life and an estimated $16,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine willl produce 478,000 units of product during its life. It actually produces the following units: 122,100 in Year 1, 124,000 in Year 2, 119,800 in Year 3, 122,100 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 depreclation 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.) Complete this question by entering your answers in the tabs below. Units of Production DDB Straight Line Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation. Straight-Line Depreciation Depreciation Expense Year 1 2 3 4 0 Total > Units of Production Straight Line

Answer 1

Luther Company
Straight line method
Annual depreciation	(Cost-Salvage Value)/Useful Life
	=(207,200-16,000)/4
	47,800
Year	Depreciation exp
1	47,800
2	47,800
3	47,800
4	47,800
Total	191,200
Units of production method
Dep per unit	=(207,200-16,000)/478,000
	0.40
							Calculation
Year	Depreciable Units	Dep per unit	Depreciation exp				Depreciable Units	Depreciation exp
1	122,100	0.40	48,840					=122,100*0.40
2	124,000	0.40	49,600					=124,000*0.40
3	119,800	0.40	47,920					=119,800*0.40
4	112,100	0.40	44,840				478,000-122,100-124,000-119,800	=112,100*0.40
Total	478,000		191,200	-			Total units cant exceed estimated units of 478,000
Double declining balance method
Double declining rate	100%/Useful Life*2
	=100%/4*2
	50%
							Calculation
Year	Beg. book value	Dep rate	Depreciation exp	Accumulated Dep	End book value		Depreciation exp	End book value
1	207,200	50%	103,600	103,600	103,600		=207,200*50%	=207,200-103,600
2	103,600	50%	51,800	155,400	51,800		=103,600*50%	=207,200-155,400
3	51,800	50%	25,900	181,300	25,900		=51,800*50%	=207,200-181,300
4	25,900		9,900	191,200	16,000		=25,900-16,000	=207,200-191,200
Total			191,200
			Last year dep of $9,900 is remaining figure to keep year end book value at salvage value of $16,000