A machine costing $213,400 with a four-year life and an estimated $19,000 salvag

Question

A machine costing $213,400 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 486,000 units of product during its life. It actually produces the following units: 121,700 in 1st year, 123,200 in 2nd year, 120,200 in 3rd year, 130,900 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimatethis 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.)

Explanation / Answer

Straight line depreciation (cost - salvage value)/Estimated useful life (213,400-19000)/4 48600 Depreciation year expense 1 48,600 2 48,600 3 48,600 4 48,600 units of production Depreciation rate = (213400-19000)/486,000 0.4 Depreciable Dep Depreciation Year units per unit Expense 1 121,700 0.4 48680 2 123,200 0.4 49280 3 120,200 0.4 48080 4 120,900 0.4 48360 DDB Rate = 1/4*2 0.5 or 50% Beginning rate Dep Accum' Book year expense dep value 1 213,400 50% 106700 106,700 106700 2 106,700 50% 53350 160050 53350 3 53,350 50% 26675 186725 26,675 4 26,675 29% 7675 194400 19000

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