Connect https newconnect.mheducation.com f low/c R Circuit Part 02 -Chapters 07-

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Connect https newconnect.mheducation.com f low/c R Circuit Part 02 -Chapters 07-11 6 Saved Help Save &Exit; Submit Check my work A machine costing $215,400 with a four-year life and an estimated $19,000 on January 1. The the following units: 122,400 in 1st salvage value is installed in Luther Company's factory factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces year, 124,000 in 2nd year, 120.500 in 3rd year, 134,100 in 4th year. The total number of units 4 exceeds the original estimate-this difference was not predicted. (The machine must not be f 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 Straighte Produci D0 Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line Year Depreciation 20 p

Explanation / Answer

Cost of Machine = $215400

Salvage Value = $19000

Life = 4 years

Total Estimated Units = 491000 units

Actual Units Produced = 1st year = 122400 units

= 2nd year = 124000 units

= 3rd Year = 120500 units

= 4th Year = 134100 units

Straight Line Depreciation

Straight Line Depreciation = (Cost of Machine - Salvage Value) / Life

= ($215400 - $19000) / 4 years

= $49100

Units of Production

Depreciable Units

(a)

Depreciation per units

(b)

Depreciation Expenses

(a*b)

Depreciation per unit = (Cost of Machine - Salvage Value) / Total Estimated Units

= ($215400 - $19000) / 491000 units

= $0.40

However, Maximum Depreciation will be $196400 ($215400 - $19000). Because The machine must not be depreciated below its estimated salvage value.

Hence, for 4th year,

Depreciation Expenses will be $49640 [$196400 - ($48960 + $49600 + $48200)].

Depreciation per unit = Depreciation expenses / Actual units produced

= $49640 / 134100 units

= $0.37 (approx.)

Beginning of period Book Value

(a)

Depreciation Rate

(b)

Depreciation Expenses

(a*b)=(c)

Accumulated Depreciation

(d)

Book Value

(a-c)

$161550

(107700+53850)

$188475

(161550+26925)

$7925

(Balancing Figure i.e. $196400 - $188475)

$196400

(188475+7925)

Depreciation Rate = [(Depreciation as per Straight Line Method * 100) / (Cost of Machine - Salvage Value)] * 200%

= [($49100 * 100) / ($215400 - $19000)] * 200%

= ($4910000 / $196400) * 200%

= 50%

Straight Line Depreciation

Year Depreciation Expenses 1 $49100 2 $49100 3 $49100 4 $49100 Total $196400

Straight Line Depreciation = (Cost of Machine - Salvage Value) / Life

= ($215400 - $19000) / 4 years

= $49100

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