Question

A machine costing $215,600 with a four-year life and an estimated $18,000 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: 122,200 in 1st year, 122,700 in 2nd year, 121,100 in 3rd year, 138,000 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.)

Answer 1

215600 18000 197600 494000 49400 Cost of the Machine Less : Salvage Value Depreciable Value of the Machine Life of the Machine Life of the Machine (Units) Straight Line Method Annual Depreciation : Depreciable Value / Life annual Depreciation: (197600/4)) Straight Line Method Depreciation Year Expenses 49400 49400 3 49400 494001 Total 197600

Units of Activity Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit :197600/494000 0.4000 Units of Activity Method Year Depreciable Units Depreciation Depreciation Per Unit Expeneses 122200 122700 121100 128000 0.40 0.40 0.40 0.40 48880 49080 48440 51200 197600 Total Double Decline Balance Method DDB Depreciation for the Period End of the Period Year Beginning Book value 215600 107800 53900 26950 Depreciation Rate 50% 50% 50% 50% Depreciation Expeneses 107800 53900 26950 8950 197600 Accumulated Depreciaion 107800 161700 188650 197600 Book Value 107800 53900 26950 18000 Totals