and an estimated $17,000 salvage value is instalied in Luther Company\'s factory

Question

and an estimated $17,000 salvage value is instalied in Luther Company's factory on January 1. The factory manager essimates the A machine costing $213,000 with a four-year lite 20,500 in 3rd year; 134,300 in 4th year produces the following units: 122,700 in 1st year; 122.500 in 2nd year, 1 not predicted. (The machine must not be depreciated below its estimatesd The total number of units produced by the end of year 4 exceeds the original estimate this difterence was salvage value.) Required Compute depreciation for each year (and total depreciation of all years places. Round your answers to the nearest whole dollar) years combined )tor the machine under each depreciation method. (Round your per unit depreciation to 2 Year Expense Total

Explanation / Answer

Answer 1 Depreciation per year using straight line method = (Cost - salvage value)/useful life = ($213000 - $17000)/4 = $49000 Straight Line Depreciation Year Depreciation 1 $49,000 2 $49,000 3 $49,000 4 $49,000 Total $196,000 Answer 2 Depreciation per unit of production = (Cost - salvage value)/Estimated production in units during lifetime Depreciation per unit of production = ($213000-$17000)/490000 units = $0.40 per unit Units of production Year Depreciable units Depreciation per unit Depreciation 1             122,700 0.4 $49,080 2             122,500 0.4 $49,000 3             120,500 0.4 $48,200 4             134,300 balance $49,720 Total $196,000 Answer 3 Double declining balance method Depreciation per year = 2*straight line depreciation rate * Book value of asset at the beginning of the year Straight line depreciation rate = $49000 / $196000 = 25% DDB Depreciation for the period End of period Year Beginning of period book Value Depreciation rate Depreciation Expense Accumulated Depreciation Book Value 1 $213,000 50% $106,500 $106,500 $106,500 2 $106,500 50% $53,250 $159,750 $53,250 3 $53,250 50% $26,625 $186,375 $26,625 4 $26,625 balance $9,625 $196,000 $17,000 $196,000

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