ezto.mheducation.com/hm.tpx?-09747226960263243 1510205077404 A machine costing $

Question

ezto.mheducation.com/hm.tpx?-09747226960263243 1510205077404 A machine costing $212,000 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 490,000 units of product during its life. It actually produces the following units: 122,900 in 1st year, 123,900 in 2nd year, 121,200 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.) Straight-Line Depreciation Year Depreciation Expense 2 Total Units of Production

Explanation / Answer

The following is the calculation of depreciation under various methods:

1. Straight line method:

note: depreciation expense under straight line method = (cost - salvage value) / number of years

=.(212,000- 16,000) /4

=>$49,000. per year.

b.units of production method.

depreciation expense per unit produced = depreciable amount / number of units estimated to be produced.

=>($212,000 - 16,000) / 490,000

=>$0.40.

Units of production method.

note: only 490,000 units will be used for depreciation, therefore in the year 4 only122,000 units will be used.

c .

Double declinining balance rate = 2 * (1/ estimated life)

=>2* (1 /4)

=>0.50.=>50%

note: in order to maintain the book value by the end of year at $16,000 , the depreciation for the year 4 is mainitained as (196,000 - accumulated depreciation till year 3) =>196,000 - 185,500=>$10,500.

Year Deprecitation expense 1 $49,000 2 $49,000 3 $49,000 4 $49,000

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