Homework Help Save & Exit Submit Check my work A machine costing $208,200 with a

Question

Homework Help Save & Exit Submit Check my work A machine costing $208,200 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 478,000 units of product during its life. It actually produces the following units: 121,800 in 1st year, 122,600 in 2nd year, 120,200 in 3rd year, 123,400 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)

Explanation / Answer

Req 1: Cost of machine: $ 208200 Salvage value: $ 17000 Life: 4 years Annual Depreciation: (Cost -salaveg value)/ Life = (208200-17000)/4= $47800 Depreciation Under SLM YEAR Depreciation Expense 1 47800 2 47800 3 47800 4 47800 Total 191200 Req 2: Cost of machine: $ 208200 Salvage value: $ 17000 Life: 478000 Depreciation per unit: (cost -salvage life) / Life = (208200-17000)/478000 = $ 0.40 per unit DEPRECIATION UNDER UNIT OF PRODUCTION YEAR DEP.UNITS DEP. PER UNIT DEPRECIATION EXPENSE 1 121800 0.4 48720 2 122600 0.4 49040 3 120200 0.4 48080 4 113400 0.4 45360 Total 478000 191200 Note: Actual units produced shall be isgnored in Year-4, only remaining units out of life will be depreciated. Req 3: Rate of SLM: 25% Rate of DDM: 50% DEPRECIATION UNDER DOUBLE DECLINING METHOD YEAR BEG. BV RATE DEPRECIATION EXP. ACC. DEP. BOOK VALUE AT END 1 208200 50 104100 104100 104100 2 104100 50 52050 156150 52050 3 52050 50 26025 182175 26025 4 26025 50 9025 191200 17000 Total 191200 Note: last year, deprecication shall be the balancing figure as the salvage value shsall be kept at 17000

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