Question

A machine costing $212,200 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 483,000 units of product during its life. It actually produces the following units: 122,500 in 1st year, 124,200 in 2nd year, 120,100 in 3rd year, 126,200 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.

Answer 1

SLM
Cost of Assets			212200
Less: Salvage value			19000
Depreciable cost			193200
Divide: Life			4
Annual depreciation			48300
Schedule for SLM
Year	Dep	Acc. Dep	Book value at end
1	48300	48300	163900
2	48300	96600	115600
3	48300	144900	67300
4	48300	193200	19000
Total	193200
DDB:
Rate of dep (100/4*2): 50%
Schedule for DDB
Year	Beg. BV	Dep	Acc. Dep	Book value at end
1	212200	106100	106100	106100
2	106100	53050	159150	53050
3	53050	26525	185675	26525
4	26525	7525	193200	19000
Total		193200
Unit of Production:
Cost of Assets			212200
Less: Salvage value			19000
Depreciable cost			193200
Divide: Life			483000
Depreciation per unit			0.4
	Production	Dep rate	Dep expense
YEar1	122500	0.4	49000
YEar2	124200	0.4	49680
YEar3	120100	0.4	48040
YEar4	126200	0.4	46480	(50480 but restricted to 46480)
Schedule of Units of production
Year	Dep	Acc. Dep	Book value at end
1	49000	49000	163200
2	49680	98680	113520
3	48040	146720	65480
4	46480	193200	19000
Total	193200