Problem 8-2A Depreciation methods LO P1 A machine costing $206,600 with a four-y

Question

Problem 8-2A Depreciation methods LO P1 A machine costing $206,600 with a four-year life and an estimated $15,000 salvage value is installed in Luther Company's factory on January 1. The units of product during its life. It actually produces the year, 121,200 in 3rd year, 121,800 in 4th year. The total exceeds the below its estimated salvage value.) factory manager estimates the machine will produce 479,000 following units: 122,700 in 1st year, 123,300 in 2nd number of units produced by the end of year 4 original estimate this difference was not predicted. (The machine must not be depreciated 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. Round your answers to the nearest whole dollar.) Straight-Line Depreciation Depreciation Expense Year Total Units of Production Year Depreciable De Expense Units per unit Total

Explanation / Answer

Solution: (1) Straight line method

Depreciation = (Cost - salvage value) / Useful life

Year 1 = (206,600 - 15,000) / 4 = $47,900

Year 2 $47,900

Year 3 $47,900

Year 4 $47,900

(2) Units of Production

Depreciation per unit = (Cost - salvage value) / Total estimated units

= (206,600- 15,000) / 479,000

= $0.4

(3) DDB method

* Depreciation ends when book value equals to salvage value.

working: DDB rate = 2 x (1÷ useful life)x100

= 2 x (1÷4)x100

= 50%

Year Depreciable Units Depreciation per Units Depreciation expense 1 122,700 0.40 $49,080 2 123,300 0.40 $49,320 3 121,200 0.40 $48,480 4 131,800 0.34 $44,720 ( balance)

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