Question

A machine costing $209,600 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 will produce 484,000 units of product during its life. It actually produces the following units: 122,400 in 1st year, 122,400 in 2nd year, 121,000 in 3rd year, 128,200 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.)

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 Double-declining-balance.

	DDB Depreciation for the Period End of Period Year Beginning of Period Book Value Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value 1 % $0 2 % 0 3 % 0 4 % 0 $0

Answer 1

Answer

• Working

A	Cost	$          209,600.00
B	Residual Value	$            16,000.00
C=A - B	Depreciable base	$          193,600.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$            48,400.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$           209,600.00	50.00%	$       104,800.00	$           104,800.00	$      104,800.00
2	$           104,800.00	50.00%	$         52,400.00	$             52,400.00	$      157,200.00
3	$              52,400.00	50.00%	$         26,200.00	$             26,200.00	$      183,400.00
4	$              26,200.00		$         10,200.00	$             10,200.00	$      193,600.00

• Requirement

Year	Beginning of Period Book Value	Depreciation Rate		Depreciation Expense	Accumulated Depreciation	Book Value
1	$           209,600.00	50	%	$       104,800.00	$      104,800.00	$           104,800.00
2	$           104,800.00	50	%	$         52,400.00	$      157,200.00	$             52,400.00
3	$              52,400.00	50	%	$         26,200.00	$      183,400.00	$             26,200.00
4	$              26,200.00		%	$         10,200.00	$      193,600.00	$             10,200.00
				$ 193,600.00