Ans. 1 | Straight line depreciation = (Cost of asset - Residual value) / Useful life in years | ||||||
($209,000 - $15,000) / 4 | |||||||
$194,000 / 4 | |||||||
$48,500 | |||||||
*In Straight line method the depreciation is equal in each year. | |||||||
Straight Line Depreciation | |||||||
Year | Depreciation Expenses | ||||||
1 | $48,500 | ||||||
2 | $48,500 | ||||||
3 | $48,500 | ||||||
4 | $48,500 | ||||||
Ans. 2 | Units of production depreciation = | ||||||
Depreciation per unit = (Cost of asset - Residual value) / Expected activity | |||||||
($209,000 - $15,000) / 485,000 | |||||||
$194,000 / 485,000 | |||||||
$0.40 | per unit | ||||||
Depreciation = Activity * Depreciation per unit | |||||||
Year | Depreciable | Depreciation | Depreciation | ||||
Units (a) | Per unit (b) | Expenses (a * b) | |||||
1 | 121700 | $0.40 | $48,680 | ||||
2 | 123400 | $0.40 | $49,360 | ||||
3 | 120500 | $0.40 | $48,200 | ||||
4 | 119400 | $0.40 | $47,760 | ||||
Total | $194,000 | ||||||
Depreciation expenses for fourth year will be calculated as follows: | |||||||
Accumulated depreciation upto three years ($48,680+$49,360+$48,200) = $146,240 | |||||||
Book value at the end of 4 year must be equal to the salvage value (i.e. $15,000) | |||||||
Accumulated depreciation for total 4 years = Total cost - Book value at the end of 4 year | |||||||
$209,000 - $15,000 = $194,000 | |||||||
Depreciation for 4th year = Accumulated depreciation for 4 years - Accumulated depreciation for 3 years | |||||||
$194,000 - $146240 | |||||||
$47,760 | |||||||
So the depreciable units of year 4 = Depreciation expense of year 4 / Depreciation per unit | |||||||
$47,760 / $0.40 = 119,400 | |||||||
Ans. 3 | Double declining balance method: | ||||||
Double declining balance depreciation rate = 2 * 1 / life of assets | |||||||
2 * 1 / 4 | |||||||
50% | |||||||
*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate | |||||||
DDB Depreciation for the Period | End of Period | ||||||
Year | Beginning of period | Depreciation | Depreciation | Accumulated | Book | ||
Book value | Rate | Expenses (a * b) | Depreciation | Value | |||
1 | $209,000 | 50% | $104,500 | $104,500 | $104,500 | ||
2 | $104,500 | 50% | $52,250 | $156,750 | $52,250 | ||
3 | $52,250 | 50% | $26,125 | $182,875 | $26,125 | ||
4 | $26,125 | $11,125 | $194,000 | $15,000 | |||
Total | |||||||
*In double declining balance method the book value at the end of year is the salvage value of the assets | |||||||
So, the depreciation expenses for the 4th year will be calculated as follows: | |||||||
Depreciation = Beginning of period book value - Salvage value | |||||||
$26,125 - $15,000 | |||||||
$11,125 | |||||||
A machine costing $209,000 with a four-year life and an estimated $15,000 salvage values installed in...
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....
A machine costing $213,000 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 490,000 units of product during its life. It actually produces the following units: 123,200 in 1st year, 123,800 in 2nd year, 120,400 in 3rd year, 132,600 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted....
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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 will 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, 122100 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...
A machine costing $215,800 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 492,000 units of product during its life. It actually produces the following units: 123,000 in Year 1, 123,200 in Year 2, 120,800 in Year 3, 135,000 in Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate-this difference was not predicted....
A machine costing $213,200 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 will produce 493,000 units of product during its life. It actually produces the following units: 122,000 In Year 1, 124,300 In Year 2, 121,100 In Year 3, 135,600 In Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate-this difference was not predicted....
A machine costing $213,800 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 487,000 units of product during its life. It actually produces the following units: 122,500 in Year 1 124,300 in Year 2.120,400 in Year 3, 129,800 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...
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....
A machine costing $216,600 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 494,000 units of product during its life. It actually produces the following units: 121,700 in 1st year, 123,000 in 2nd year, 121,500 in 3rd year, 137,800 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate-this difference was not predicted....
A machine costing $210,600 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 489,000 units of product during its life. It actually produces the following units: 121700 in Year 1 123.400 in Year 2, 120,700 in Year 3, 133 200 in Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate this difference was...