roblems Help Save & Exit Sub Check my work A machine costing $211,200 with a fou

Question

roblems Help Save & Exit Sub Check my work A machine costing $211,200 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 488,000 units of product during its life. It actually produces the following units: 122.500 in 1st year, 123,700 in 2nd year, 119,800 in 3rd year, 132,000 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.) Complete this question by entering your answers in the tabs below Straight Line Production Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double- dedining-balance Beginning of Period Book Depreciation Depreciation Acc umulated Book Value Expense De C Prev2of13 Next > So 80 p 3 7 9 0

Explanation / Answer

Cost of Equipment: $ 211200 Salvage value: $ 16000 Life; 4 years Depreciable amount: Cost - salvage value =211200-16000 = $ 195,200 Annual Depreciation under SLM = 195200/4 = $48,800 Depreciation per unit: 195200 /488,000 = 0.40 per unit Rate under SLM = 25% Rate under DDM =25*2 =50% Depreciation under SLM: Year Annual Depreciation 1 48800 2 48800 3 48800 4 48800 Depreciation Under Units of Production Year Depreciation units Dep per unit Depreciation expense 1 122500 0.4 49000 2 123700 0.4 49480 3 119800 0.4 47920 4 132000 0.4 48800 (balancing figure) Note: As Actual Production exceed the estimated, the depreciation in Year-4 shall be adjusted for salvage value. Depreciation Under DDM: Year Book value Depreciation Depreciation Accumulated Dep Book value Beginning rate Expense at the end 1 211200 50% 105600 105600 105600 2 105600 50% 52800 158400 52800 3 52800 50% 26400 184800 26400 4 26400 50% 10400 195200 16000 (Balancing figure) Note: The Year-4 depreciation expense shall be adjusted for net salvage value at the end of life.

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