Question

A machine costing $213,600 with a four-year life and an estimated $16,000 salvage value is installed in Tonys 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: 121,800 in Year 1, 123,500 in Year 2, 121,100 in Year 3, 137,600 in Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate—this difference was not predicted. (The machine cannot be depreciated below its estimated salvage value.)

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

1A. Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation.

Year	Depreciation Expense
1	$
2	$
3	$
4	$
Total	$

1B. Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Units of production.

Year	Units	Depreciable units	Depreciation per unit	Depreciation expense
1	121,800
2	123,500
3	121,100
4	137,600
Total

1C. Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Double-declining-balance.

Year	Beginning of period book value	Depreciation Rate	Depreciation expense	Accumulated depreciation	Book Value
1
2
3
4
Total

Answer 1

ans 1A	Annual depreciation =		49400
	(213600-16000)/4
	under the Straight-line depreciation.
	Year	Depreciation Expense
	1	49400
	2	49400
	3	49400
	4	49400
	Total	197600
Ans 1B.
	Depreciation per unit		0.40
	(213600-16000)/494,000
	Year	Units	Depreciable units	Depreciation per unit	Depreciation expense
	1	121,800	121,800	0.4	48720
	2	123,500	123,500	0.4	49400
	3	121,100	121,100	0.4	48440
	4	137,600	127,600	0.4	51040
	Total		494000		197600
Ans 1B.	Depreciation rate per annum = 2/4		50.0%
	Year	Beginning of period book value	Depreciation Rate	Depreciation expense	Accumulated	Book
	depreciation	Value
	1	213600	50%	106800	106800	106800
	2	106800	50%	53400	160200	53400
	3	53400	50%	26700	186900	26700
	4	26700		10700	197600	16000
	Total			197600