Answer:
Luther Company
Depreciation expense for each year:
a1) Straight line method:
= $195,600/4
= $48,900
a2) Total Depreciation = $195,600 ($48,900 x 4)
b1) Production unit method:
Depreciation rate = $195,600/ 489,000
= $0.40 per unit
Year 1 = 122,800 x $0.40 = $49,120
Year 2 = 122,900 x $0.40 = $49,160
Year 3 = 120,500 x $0.40 = $48,200
Year 4 = 132,800 x $0.40 = $53,120 but cannot exceed $49,120, so it equal to $49,120
a2) Total Depreciation = $195,600 ($49,120 + 49,160 + 48,200 + 49,120)
Explanation:
a) Data and Calculations:
Cost of machine = $212,600
Salvage value 17,000
Depreciable value $195,600
Useful life = 4 years
Estimated production unit = 489,000 units
b) Using the straight-line method, Luther Company depreciates the asset with the same amount of calculated depreciation. This is calculated by dividing the depreciable amount of the asset by the number of years the asset will be put to use. The production unit method uses an estimate of the total production units to divide the depreciable amount. The depreciation rate obtained is applied to the number of units produced each year to ascertain the year's depreciation expense.
