Question

A machine costing $209,400 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 476,000 units of product during its life. It actually produces the following units: 122,000 in 1st year, 122,500 in 2nd year, 121,000 in 3rd year, 120,500 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.)

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.

	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 % $209,400 2 % 0 3 % 0 4 % 0 $0

Answer 1

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