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 1^st year, 124,000 in 2^nd year, 121,800 in 3^rd year, 15,200 in 4^th 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:

Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

Year

Straight-line

Unit-of-Production

Double-Declining Balance

Answer 1