A machine costing 209800 with a fouryear life and an estimat

A machine costing $209,800 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company\'s factory on January 1. The factory manager estimates the machine will produce 477,000 units of product during its life. It actually produces the following units: 123,100 in 1st year 123,100 in 2nd year; 121,000 in 3rd year; 119,800 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimatethis 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.)

Solution

Depreciation Per unit = (209800 -19000)/ 477,000 units Depreciation Per unit = $0.40 per Unit Units of production Year Depreciable Units Depreciation per unit Depreciation Expense 1 123100 0.40 49240 2 123100 0.40 49240 3 121000 0.40 48400 4 119800 0.37 43920 487000 190800 Depreciation rate under DDB method is 2 X SLM depreciation Rate As life of Asset is 4 years , SLM Depreciation rate is 25% Depreciation rate under DDB method is 2 X 25% = 50% DDB Depreciation fort the period Year Beginning of period Book Value Depreciation Rate Depreciation Expense Accumualated Depreciation Book Value 1 209800 50% 104900 104900 104900 2 104900 50% 52450 157350 52450 3 52450 50% 26225 183575 26225 4 26225 50% 7225 190800 19000 190800