value is installed in Luther Companys factory on the units 1

value is installed in Luther Company\'s factory on the units: 121,500 in 1st year. 123,400 in 2nd year, 120.000 in 3rd year, 137.100 in 4th year. The total the end of year 4 exceeds the original difference was not predicted. (The machine must not be depreciated below its 10 to 2 declmal places. Round your answers to the nearest whole dollar. Straight Line Production Units of Type

Solution

a)

Cost of the Machine = 213800

Estimated useful life = 4 years

Salvage Value = 17000

Straight line method = (Cost of Asset – salvage value) / useful life

=(213800 – 17000 )/4 = 49200

Straight line Depreciation

Year

Depreciation Expense

1

49200

2

49200

3

49200

4

49200

Total

196800

Double Declining Balance Method :

Straight line depreciation rate = 100 / useful life = 100/ 4 = 25%

Double declining depreciation rate = 25% * 2 = 50%

DOB Depreciation for the period

End of period

Year

Beginning of period book value

Depreciation rate

Depreciation Expense

Accumulated Depreciation

Book Value

1

213800

50

%

106900

106900

213800 – 106900 = 106900

2

106900

50

%

53450

160350

213800-160350=53450

3

53450

50

%

26725

187075

213800-187075=26725

4

26725

-

%

26725 – 17000 = 9725 (restricted to salvage value)

196800

213800 – 196800 = 17000 (Salvage value)

                                                          Units of Production Method

Year

Depreciable units

Depreciation per unit

Depreciation Expense

1

121500

48600/121500 = 0.4

121500/492000 * (213800-17000) = 0.24695*196800 = 48600

2

123400

49360/123400 = 0.4

123400/492000*(213800-17000)

=0.25081*196800 = 49360

3

120000

48000/120000 = 0.4

120000/492000*(213800-17000)

=0.24390*196800 = 48000

4

137100 – 10000 = 127100 (restricted to original estimate)

50840/127100 = 0.4

127100/492000*(213800-17000)

0.25833*196800 = 50840

Total

492000

0.4

196800

Straight line Depreciation
Year	Depreciation Expense
1	49200
2	49200
3	49200
4	49200
Total	196800