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 Year 1, 124,600 in Year 2, 121,800 in Year 3, and 15,200 in Year 4. The total number of units produced by the
end of Year 4 exceeds the original estimate-this difference was not predicted. Note: The machine cannot 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.)

Answer 1

The computation of the depreciation expense for each year and accumulated depreciation under the four depreciation methods are as follows:

Units of production method:

Year 1   = $110,000 (220,000 x $0.50)

Year 2  = $62,300 (124,600 x $0.50)

Year 3  = $60,900 (121,800  x $0.50)

Year 4  =   $4,300 ($237,500 - $233,200)

Accumulated Depreciation = $237,500

Straight-line method:

Year 1 = $59,375

Year 2 = $59,375

Year 3 = $59,375

Year 4 = $59,375

Accumulated depreciation = $237,500

Double-declining balance method:

Year 1 = $128,750 ($257,500 x 50%)

Year 2 = $64,375 ($128,750 x 50%)

Year 3 = $32,187.50 ($64,375 x 50%)

Year 4 = $12,187.50 ($237,500 - $225,312.50)

Accumulated depreciation = $237,500

Sum-of-the-years-digit method:

Year 1 = $95,000 ($237,500 x 4/10)

Year 2 = $71,250 ($237,500 x 3/10)

Year 3 = $47,500 ($237,500 x 2/10)

Year 4 = $23,750 ($237,500 x 1/10)

Accumulated depreciation = $237,500

Data and Calculations:

Cost of equipment = $257,500

Estimated useful life = 4 years

Salvage value = $20,000

Depreciable amount = $237,500 ($257,500 - $30,000)

Estimated production units = 475,000 units

Units of production depreciation rate = $0.50 ($237,500/475,000)

Depreciable amount = $237,500 ($257,500 - $30,000)

Annual depreciation = $59,375 ($237,500/4)

Depreciation rate = 50% (100/4 x 2)

Sum of the years digit = 10 (1 + 2 + 3 + 4)

Learn more about the various depreciation methods at https://brainly.com/question/18724238

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