1. A three-year-old machine has a cost of $17,200, an estimated residual value o
ID: 2547687 • Letter: 1
Question
1. A three-year-old machine has a cost of $17,200, an estimated residual value of $1,200, and an estimated useful life of 32,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,400 hours in year 1; 7,750 hours in year 2; and 7,900 hours in year 3. Calculate the net book value at the end of the third year.
2. A three-year-old machine has a cost of $63,000, an estimated residual value of $5,800, and an estimated useful life of five years. The company uses double-declining-balance depreciation. Calculate the net book value at the end of each year.
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Explanation / Answer
1) Depreciation rate = (17200-1200)/32000 0.5 per machine hour Accumulated depreciation = (3,400+7,750+7900)*$.5 9525 Net book value at the end of third year orginal cost 17200 less:Accumulate depreciation -9,525 Net book value at the end of third year 7675 answer 2) Depreciation rate = 1/5*2= 0.4 or 40% cost Dep Net value year 1 63,000 25200 37800 year 2 37,800 15120 22680 year 3 22,680 9072 13,608 Net book value at year end $13,608 anser
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