Question

A machine costing $212,800 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 492,000 units of product during its life. It actually produces the following units: 122,000 in 1st year, 124,300 in 2nd year, 119,700 in 3rd year, 136,000 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

Cost of the Machine Less : Salvage Value Depreciable Value of the Machine Life of the Machine Life of the Machine ( Units) 212800 16000 196800 4 492000 Straight Line Method Annual Depreciation : Depreciable Value / Life annual Depreciation: (196800/4)) 49200 Straight Line Method Depreciation Expenses Year 1 49200 2 49200 49200 4 49200 Total 196800

Units of Activity Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit :196800/492000 0.4000 Units of Activity Method Depreciati Depreciation Depreciable Year on Per Unit Units Expeneses 1 122000 0.40 48800 124300 49720 2 0.40 119700 0.40 47880 126000 4 0.40 50400 Total 196800

Double Decline Balance Method End of the Period DDB Depreciation for the Period Depreciatio Accumulate Beginning Book Depreciation d Вook Expeneses Depreciaion value Value Year Rate 50% 106400 1 212800 106400 106400 50% 53200 159600 53200 2 106400 50% 186200 3 53200 26600 26600 50% 4 26600 10600 196800 16000 Totals 196800