Question

A machine costing 211 000 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 480,000 units of product during its life. It actually produces the following units: 121,600 in 1st year, 124,200 in 2nd year, 120,100 in 3rd year, 124,100 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.)

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

Answer 1

To calculate the depreciation for each year, subtract the salvage value from the original cost and divide it by the total number of units produced over the machine's life. The total depreciation can be calculated by summing up the depreciation for each year.

Step-by-step explanation:

Depreciation is the allocation of the cost of an asset over its useful life. In this scenario, we have a machine that costs $211,000 with a four-year life and a $19,000 salvage value. To calculate the depreciation for each year, we need to subtract the salvage value from the original cost and divide it by the total number of units produced over the machine's life. For each year, the depreciation is as follows:

• Year 1: ($211,000 - $19,000) / 480,000 * 121,600
• Year 2: ($211,000 - $19,000) / 480,000 * 124,200
• Year 3: ($211,000 - $19,000) / 480,000 * 120,100
• Year 4: ($211,000 - $19,000) / 480,000 * 124,100

The total depreciation for all years combined can be calculated by summing up the depreciation for each year.