A machine costing $209.400 with a four-year life and an estimated $17000 salvage

Question

A machine costing $209.400 with a four-year life and an estimated $17000 salvage value is installed in Luther January 1. The factory mana following units: 122,200 in 1st year, 122600 in 2nd year, 120,000 in 3rd year, 126,200 in 4th year. The total number of units produced ger estimates the machine will produce 481,000 units of product during its life. It actually produces the estimate-this difference was not predicted. (The machine must not be depreciated below its estimated salvage value) Required: (Round year (and total depreciation of all years combined) for the machine under each depreciation method 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 Units of Production DDB Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line Year Total S

Explanation / Answer

Computation of depreciation expense for each year

Straight line method:

Depreciation expense = (Cost of asset - Salvage value) / estimated life of asset

= ($209400 - $17000) / 4 years

= $48100.

Depreciation for 4 years = $48100 per year.

Total depreciation = $192400.

Units of production method:

Depreciation per unit = ($209400 - $17000) / 481000 units

= $0.4

Depreciation for year 1 = 122200 units * $0.4

= $48880.

Depreciation for year 2 = 122600 units * $0.4

= $49040

Depreciation for year 3 = 120000 units * $0.4

= $48000

Depreciation for year 4 = 126200 units * $0.4

= $50480.

Total depreciation = $196400.

Double declining method:

Straight line depreciation percent = 100% / 4 years

= 25%

Straight line depreciation rate = 2 * 25%

= 50%.

Depreciation for year 1 = $209400 * 50% = $104700

Depreciation for year 2 = ($209400 - $104700) * 50% = $52350

Depreciation for year 3 = ($209400 - $104700 - $52350) * 50% = $26175

Depreciation for year 4 = ($209400 - $104700 - $52350 - $26175) * 50% = $13088

Total depreciation = $196313.

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