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Problem 8-2A Depreciation methods LO P1 A machine costing $215,200 with a four­year life and an...

Problem 8-2A Depreciation methods LO P1

A machine costing $215,200 with a four­year 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 488,000 units of product during its life. It actually produces the following units: 121,700 in 1st year, 123,800 in 2nd year, 120,900 in 3rd year, 131,600 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.)

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight­line depreciation.

Straight Line

Units of Production

DDB

Straight­Line Depreciation

Year

Depreciation Expense

1

2

3

4

Total

Homework Answers

Answer #1

Straight­Line Depreciation : (cost of asset - salvage value)/ life of asset

Year

Depreciation Expense

1

(215200-20000)/4= 48800

2

48800

3

48800

4

48800

Total

195200

Unit of Production Depreciation : ( cost of asset - salvage value) / number of units produced

Year

Depreciation Expense

1

(215200-20000)/49800= .392 * 121700=47700

2

.392*123800=48525

3

.392*120900=47390

4

.392*131600=51585

Total

195200

DDB Depreciation : 200% of SLM rate on balancing method

SLM rate= 100/4=25%

Ddb =200% of 25% = 50% onbalancing value of asset

Year

Depreciation Expense

1

215200*50%=107600

2

107600*50%=53800

3

53800*50%=26900

4

26900*50%=13450

Total

20175
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