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A machine costing $209,400 with a four-year life and an estimated $19,000 salvage value is installed...

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Accounting

A machine costing $209,400 with a four-year life and anestimated $19,000 salvage value is installed in Luther Company’sfactory on January 1. The factory manager estimates the machinewill produce 476,000 units of product during its life. It actuallyproduces the following units: 122,000 in 1st year, 122,500 in 2ndyear, 121,000 in 3rd year, 120,500 in 4th year. The total number ofunits produced by the end of year 4 exceeds the originalestimate—this difference was not predicted. (The machine must notbe depreciated below its estimated salvage value.)

  
Required:

Compute depreciation for each year (and total depreciation ofall 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.)

Compute depreciation for each year (and total depreciation ofall years combined) for the machine under eachDouble-declining-balance.

DDB Depreciation for the PeriodEnd of Period
YearBeginning of Period Book ValueDepreciation RateDepreciation ExpenseAccumulated DepreciationBook Value
1$209,400%$209,400
2%0
3%0
4%0
$0

Answer & Explanation Solved by verified expert
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Answers

  • ONLY Double Declining balance method has been specifically asked
  • Working for Double Declining balance

A

Cost

$          209,400.00

B

Residual Value

$            19,000.00

C=A - B

Depreciable base

$          190,400.00

D

Life [in years]

4

E=C/D

Annual SLM depreciation

$            47,600.00

F=E/C

SLM Rate

25.00%

G=F x 2

DDB Rate

50.00%

  • Requirement

DDB Depreciation for the Period

End of Period

Year

Beginning of Period Book Value

Depreciation Rate

Depreciation Expense

Accumulated Depreciation

Book Value

1

$209,400

50

%

$104,700

$104,700

$104,700

2

$104,700

50

%

$52,350

$157,050

$52,350

3

$52,350

50

%

$26,175

$183,225

$26,175

4

$26,175

%

$7,175 [26175 – 19000]

$190,400

$19,000

$190,400

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