Question

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: 220,000 in Year 1, 124,600 in Year 2, 121,800 in Year 3, and 15,200 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.)
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.)
Complete this question by entering your answers in the tabs below.

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

	Straight-Line Depreciation Year Depreciation Expense 1 2 3 4 Total

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

Units of Production Year Units Depreciable Units Depreciation per unit Depreciation Expense 1 220,000 2 124,600 3 121,800 4 15,200 Total

Compute depreciation for each year (and total depreciation of all years combined) for the machine under the 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 % 2 % 3 % 4 % Total

Answer 1

Straight Line Depreciation
Year	Depreciation Expense
1	$59,375
2	$59,375
3	$59,375
4	$59,375
Total	$237,500

Depreciation Expense = (machine costing - Salvage)/Life

= ($257500-$20000)/4 = $59375

Units of Production
Year	Units	Depreciable Units	Depreciation per unit	Depreciation Expense
1	220000	220000	$0.50	$110,000
2	124600	124600	$0.50	$62,300
3	121800	121800	$0.50	$60,900
4	15200	8600	$0.50	$4,300
Total		475000		$237,500

Depreciation per unit = ($257500 - $20000)/475000 units = $0.50

	DDP Depreciation for the Period	End of Period
Year	Beginning of Period Book Value	Depreciation Rate	Depreciation Expense	Accumulated Depreciation	Book Value
1	$257,500	50%	$128,750	$128,750	$128,750
2	$128,750	50%	$64,375	$193,125	$64,375
3	$64,375	50%	$32,188	$225,313	$32,187
4	$32,187	50%	$12,187	$237,500	$20,000
Total			$237,500

Depreciation Rate = (1/Life) * 2

= (1/4) * 2 = 50%