Question

apter 08 Homework 2 i A machine costing $214,600 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 494,000 units of product during its life. It actually produces the following units: 122.400 in Year 1,124,300 in Year 2.121300 in Year 3. 136,000 in Year 4. The total number of units produced by the end of Year 4 exceeds the onginal estimate this difference was not predicted. (The machine cannot 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) Complete this question by entering your answers in the tabs belo Straight Line Units of Production DDB mbined) for the machine under the Straight-line Compute depreciation for each year and total depreciation. Straight Line Depreciation Depreciation Year Units of Production >

Answer 1

Calculation of Depreciation exp. Under SLM Method Acquisition cost - Salvage value useful life (214600 - 17000) Depreciable cost Depreciation for the year Dep. Expense Dep. Rate (1/4 = 25%) Accumulated dep Asset cost-BS 214600 At acquisition Year 1 Year 2 Year 3 Year 4 197600 197600 197600 197600 25% 25% 25% 25% 49400 49400 49400 49400 49400 98800 148200 197600 Book value - BS 214600 165200 115800 66400 17000 Calculation of Depreciation exp. Under Units of production method (214600 - 17000) Depreciation for the year Depreciable cost Dep. Rate Dep. Expense Accumulated dep. Asset cost-BS 214600 At acquisition Year 1 Year 2 Year 3 Year 4 197600 197600 197600 197600 197600 * 122400 / 494000 197600 * 124300 / 494000 197600*121300 / 494000 Adjusted to salvage value 48960 49720 48520 50400 48960 98680 147200 197600 Book value 214600 165640 115920 67400 17000 Accumulated dep. At acquisition Year 1 Year 2 Year 3 Year 4 Calculation of Depreciation exp. Under Double declining balance Depreciation for the year Asset cost-BS Opening Book value (a) Depreciation rate(b) (see W.N) Dep. Expense (a*b) 214600 214600 50% 107300 107300 50% 53650 53650 50% 26825 26825 Adjusted to salvage value 9825 107300 53650 26825 9825 Closing Book value 214600 107300 53650 26825 17000 Working Note ( WN 1) - In DDB method, Salvage value is not considered. SLM rate = 25% DDB rate = 25*2 = 50 %