A new machine with a purchase price of $97,641.00, with transportation costs of

Question

A new machine with a purchase price of $97,641.00, with transportation costs of $8,751.00, installation costs of $6,548.00, and special acquisition fees of $1,701.00. Calculate a cost basis.

Select the correct answer.

$97,641.00

$104,189.00

$114,641.00

$105,890.00

A machine with a cost of $76,560.00 has an estimated residual value of $5,844.00 and an estimated life of 3 years or 14,382 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 4,662 hours?

Select the correct answer.

$47,144.00

$24,817.32

$23,572.00

$22,922.96

Explanation / Answer

Question – First;

Cost basis of Machine = $114641

Explanation;

Cost basis of machine is consisted of all those costs which are essential to bring a machine into functional conditional. Hence in given case cost basis of machine will be;

(Purchase price $97641 + Transportation costs $8751 + Installation costs $6548 + Special acquisition fees $1701) = $114641

Question – Second;

The amount of depreciation for the second full year = $22922.96

Explanation;

Cost of machine is given = $76560

Residual value is given = $5844

Total estimated hours = 14382

Total hours used in second year = 4662

So depreciation for second year will be ($76560 - $5844) * 4662 / 14382 = $22922.96 (Approx.)

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