A machine costing $208,800 with a four-year life and an estimated $18,000 salvag

Question

A machine costing $208,800 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 477,000 units of product during its life. It actually produces the following units: 122,700 in 1st year, 123,400 in 2nd year, 120,800 in 3rd year, 120,100 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.)

1) Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line depreciation.
2)Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Units of production.
3)Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.

Explanation / Answer

Straight-Line Depreciation Year Depreciation Expense 1 47700 =(208800-18000)/4 2 47700 3 47700 4 47700 Total 190800 2 Units of Production Year Depreciable Units Depreciation per unit Depreciation Expense 1 1,22,700 0.4 49080 2 1,23,400 0.4 49360 3 1,20,800 0.4 48320 4 1,10,100 0.4 44040 Total 477000 190800 3 DDB Depreciation for the Period End of Period Year Beginning of Period Book Value Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value 1 208800 50% 104400 104400 104400 2 1,04,400 50% 52200 156600 52200 3 52,200 50% 26100 182700 26100 4 26,100 50% 8,100 190800 18000 Total 190800

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