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 1st year, 124,600 in 2nd year, 121,800 in 3rd year, 15,200 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

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	Units-of-Production	Double-Declining-Balance

Check Year 4: units-of-production depreciation, $4,300; DDB depreciation, $12,187

Answer 1

	WN1
	Machine Cost	257500
	Less: Salvage	20000
	Deprciable cost	237500
	Expected Units	475000
	Depreciation PU	0.50				Main Answer:	SLM		Unit of Produtn		DDM
						Year	Depreciation PA	Accumulated Depreciation	Depreciation PA	Accumulated Depreciation	Depreciation PA	Accumulated Depreciation
	Unit of Production Method:		(Units*0.50)			1	59375	59375	110000	110000	128750	128750
	Year	Units	Depreciation PA	Accumulated Depreciation		2	59375	118750	62300	172300	64375	193125
	1	220000	110000	110000		3	59375	178125	60900	233200	32187.5	225312.5
	2	124600	62300	172300		4	59375	237500	4300	237500	12187.5	237500
	3	121800	60900	233200
	4	15200	4300	237500
	Total	481600	(237500-233200)
	WN2: Straight Line Method
	Machine Cost	257500
	Less: Salvage	20000
	Deprciable cost	237500
	Life	4
	Depreciation PA	59375
	Year	Depreciation PA	Accumulated Depreciation
	1	59375	59375
	2	59375	118750
	3	59375	178125
	4	59375	237500
	Total
	WN3: Double Dec Method
	Machine Cost	257500
	Life	4
	Depreciation Rate	1/4
	Depreciation Rate	25.00%
	Doouble Rate	50.00%
			(Opening balance*50%)
	Year	Opening Balance	Depreciation PA	Accumulated Depreciation	Closing Balance
	1	257500	128750	128750	128750
	2	128750	64375	193125	64375
	3	64375	32187.5	225312.5	32187.5
	4	32187.5	12187.5	237500	20000
	Total		(237500-225312.50)