Problem 8-2A Depreciation methods LO P1 A machine costing $211,200 with a four-y
ID: 2578387 • Letter: P
Question
Problem 8-2A Depreciation methods LO P1
A machine costing $211,200 with a four-year life and an estimated $18,000 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: 121,700 in 1st year, 124,100 in 2nd year, 120,200 in 3rd year, 127,000 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. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)
Straight-Line Depreciation Depreciation Expense Year TotalExplanation / Answer
Answer
A
Cost
211200
B
Salvage Value
18000
C=A-B
Depreciable base
193200
D
Life (in years)
4
E=C/D
SLM Annual Depreciation
48300
Year
Depreciation expense
1
48300
2
48300
3
48300
4
48300
TOTAL
193200
A
Cost
211200
B
Salvage Value
18000
C=A-B
Depreciable base
193200
D
Estimated Units
483000
E=C/D
Depreciation per unit
0.4
Year
Depreciable units
Depreciation per unit
Depreciation expense
1
121700
0.4
48680
2
124100
0.4
49640
3
120200
0.4
48080
4
127000
46800 [cannot lead to made total depreciation exceed $193200, hence restricted to $46800]
TOTAL
493000
193200
A
Cost
211200
B
Salvage Value
18000
C=A-B
Depreciable base
193200
D
Life (in years)
4
E=C/D
SLM Annual Depreciation
48300
F=E/C
SLM %
25%
G=F x 2
DDB %
50%
Depreciation for the period
End of Period
Year
Beginning of Period book Value
Depreciation Rate
Depreciation expense
Accumulated Depreciation
Book Value
1
211200
50%
105600
105600
105600
2
105600
50%
52800
158400
52800
3
52800
50%
26400
184800
26400
4
26400
8400
193200
18000
TOTAL
193200
A
Cost
211200
B
Salvage Value
18000
C=A-B
Depreciable base
193200
D
Life (in years)
4
E=C/D
SLM Annual Depreciation
48300