A machine costing $257,500 with a four-year life and an estimated $20,000 salvag

Question

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company's factory January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: 220,000 in 1st year, 124,600 in 2nd year, 121,800 in 3rd year, 15,200 in 4th year. The total number of units produced b 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.) Complete this question by entering your answers in the tabs below. Units of Straight Line Production ODB Compute depreclation for each year (and total depreclation of all years combined) for the machine under each Straight-line

Explanation / Answer

1)Straight line methosd :[cost -salvage ]/useful life

     =[257500-20000]/4

       =59375

237500

2)Unit of production:

Depreciation per unit : [cost -salvage ]/useful life in units

      =[257500-20000]/475000

       = $ .50 per unit

3)Rate =2 /useful life

      = 2/4

      = .50 or 50%

**since depreciation for year 4will reduce ending bool value below salvage required ,depreciation for year 4 is restricted.

Depreciation 1 59375 2 59375 3 59375 4 59375 Total

237500

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