### Depreciation Calculation ExampleA machine costing $213,400 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company’s factory on January 1. The machine is expected to produce 491,000 units during its life. However, the actual production is as follows:- Year 1: 121,800 units- Year 2: 124,000 units- Year 3: 120,100 units- Year 4: 135,100 unitsBy the end of Year 4, total production exceeds the original estimate, which was not predicted. The machine cannot be depreciated below its salvage value.#### Required:Compute the annual and total depreciation using three methods:1. **Straight Line**2. **Units of Production**3. **Double Declining Balance (DDB)***Note:* Round your per unit depreciation to 2 decimal places and depreciation to the nearest whole dollar.### Instructions:Complete the question by filling in the provided tables for each depreciation method.#### Straight-Line Depreciation Table| Year | Depreciation Expense ||-------|----------------------|| Year 1| || Year 2| || Year 3| || Year 4| || Total | |This table is used to calculate depreciation evenly over the four years based on the initial cost and salvage value.Explore other tabs to calculate depreciation using Units of Production and Double Declining Balance methods. Each method offers a different approach to reflect the wear and tear of the machine as it ages or based on its output level. ### Depreciation Calculation for Units of ProductionThis section focuses on computing depreciation based on the Units of Production method for a machine. The table below details the specified units for each year and requires the determination of depreciable units, depreciation per unit, and the corresponding depreciation expense.#### Table: Units of Production| Year | Units | Depreciable Units | Depreciation per unit | Depreciation Expense ||-------|--------|--------------------|-----------------------|----------------------|| Year 1 | 121,800 | | | || Year 2 | 124,000 | | | || Year 3 | 120,100 | | | || Year 4 | 135,100 | | | || **Total** | | | | |- **Year**: Denotes the fiscal year.- **Units**: Represents the number of units produced by the machine each year.- **Depreciable Units**: This column is to be filled with the number of units that are considered for depreciation.- **Depreciation per unit**: It indicates the cost associated with each unit for depreciation purposes.- **Depreciation Expense**: This column will show the total depreciation cost calculated for each year.#### Instructions1. **Compute the Depreciable Units**: Calculate the total number of depreciable units for each year based on machine usage.2. **Determine Depreciation per Unit**: Find the cost per unit for depreciation.3. **Calculate Depreciation Expense**: Apply the depreciation per unit to the depreciable units to determine the expense for each year.4. **Sum and Total**: Total the depreciation expenses over the span of all years for cumulative understanding.This method ensures that depreciation is aligned with the actual usage of the machine, providing a clear reflection of its wear and tear over time.

The depreciation expense is charged on fixed assets as reduced value of the fixed asset with usage…

A machine costing $213,400 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces the following units: 121,800 in Year 1, 124,000 in Year 2, 120,100 in Year 3, 135,100 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. Round your answers to the nearest whole dollar.) Complete this question by entering your answers in the tabs below. Straight Line Units of Production Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation. Straight-Line Depreciation Depreciation Expense Year Year 1 Year 2 Year 3 DDB

A machine costing $213,400 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces the following units: 121,800 in Year 1, 124,000 in Year 2, 120,100 in Year 3, 135,100 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. Round your answers to the nearest whole dollar.) Complete this question by entering your answers in the tabs below. Straight Line Units of Production Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation. Straight-Line Depreciation Depreciation Expense Year Year 1 Year 2 Year 3 DDB

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A machine costing $217,200 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 493,000 units of product during its life. It actually produces the following units: 122,200 in Year 1, 124,100 in Year 2, 121,500 in Year 3, 135,200 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. Round your answers to the nearest whole dollar.) A machine costing $217,200 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…