A machine costing $209,800 with a four-year life and an estimated $17,000 salvag
ID: 342067 • Letter: A
Question
A machine costing $209,800 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 482,000 units of product during its life. It actually produces the following units: 123,000 in 1st year; 124,200 in 2nd year; 120,300 in 3rd year, 124,500 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 TotalExplanation / Answer
Answer:
1
Straight-line Depreciation
=209800-17000/4
=48,200 deprecation each year
Year
Depreciation
1
48200
2
48200
3
48200
4
48200
Total
192800
______________________________________________
2
Depreciation as per unit of production method
=Cost- salvage value / total unit produced during the life
=209800-17000 /482000 units
=0.4 depreciation each unit
124500
Year
Depreciation
Calculation
1
49200
123000*0.4
2
49680
124200*0.4
3
48120
120300*0.4
4
45600
Difference up to
salvage value
Total
192600
___________________________________
3
Double declining method
=2 x (100/4)
=2 x25%
=50%
Year
Beginning
value
Depreciation
rate
Depreciation
Exp
Accumulated
Depreciation
Book
value
1
209800
50%
104900
104900
104900
2
104900
50%
52450
157350
52450
3
52450
50%
26225
183575
26225
4
26225
50%
9225
192800
17000
Note :
4th year depreciation figure is adjusted up to salvage value
Year
Depreciation
1
48200
2
48200
3
48200
4
48200
Total
192800
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