Problem 10-2A

Depreciation methods

P1

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Companys 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 estimatethis difference was not predicted. Note: The machine cannot be depreciated below its estimated salvage value.

Check Year 4: units-of-production depreciation, $4,300; DDB depreciation, $12,187

Required

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Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

Year

Straight-Line

Unit-of-Production

Double-Decline-Balance