Question

A machine costing $209,000 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 485,000 units of product during its life. It actually produces the following units: 122,500 in Year 1, 122,700 in Year 2, 120,300 in Year 3, 129,500 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 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 Units of DDB Line Producti... Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation. Straight-Line Depreciation Depreciation Year Expense Total Straight Line Units of Production >

Answer 1

1a.	Straight Line method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value
		=	($209000 - $15000) / 4 years
		=	$                    48,500	per year
	Year	Depreciation expense
	1	$         48,500
	2	$         48,500
	3	$         48,500
	4	$         48,500
	Total	$     1,94,000
1b.	Units of production method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value in hours
		=	($209000 - $15000) / 485000
		=	$                         0.40
		Units	Depreciable units	Depreciation per unit	Depreciation expense
	1	1,22,500	1,22,500	$                 0.40	$           49,000
	2	1,22,700	1,22,700	$                 0.40	$           49,080
	3	1,20,300	1,20,300	$                 0.40	$           48,120
	4	1,29,500	1,19,500	$                 0.40	$           47,800
	Total		4,85,000		$       1,94,000
1c.	Double - declining balance method:-
	Double declining rate	=	(100%/ 4 years) X 2
		=	50%
		Beginning of period book value	Depreciation rate	Depreciation expense	Accumulated depreciation	Book value
	1	$     2,09,000	50%	$         1,04,500	$       1,04,500	$ 1,04,500
	2	$     1,04,500	50%	$             52,250	$       1,56,750	$     52,250
	3	$         52,250	50%	$             26,125	$       1,82,875	$     26,125
	4	$         26,125	50%	$             11,125	$       1,94,000	$     15,000
				(bal fig.)
	Total			$         1,94,000