Brookside Enterprises acquired a piece of machinery on January 3, 2003. The tota

Question

Brookside Enterprises acquired a piece of machinery on January 3, 2003. The total cost of the machinery was $138,600. Brookside estimated that the machinery would be used for 77,000 hours before being sold for an estimated $3,850. Brookside uses the units-of-production method of depreciation. Assuming the machine was used for 15,800 hours during 2003, 18,300 hours during 2004, and 17,400 hours during 2005, the balance in the accumulated depreciation account on January 2, 2005 would be: (answer is 90,125)

Explanation / Answer

First calculate the total depreciation amount over the period of the asset.

Depreciation value at the end of the asset life, i.e. salvage value is given as 3850, so over the useful life of the asset it has to be depreciated by 138600 - 3850 = 134750.

Useful life of asset is 77,000 hours and it is already used for 51500 hours in years 2003, 2004 and 2005

So percentage of asset's life used is 51500 / 77000 = 66.9%

Accumulated depreciation would be 66.9% * 134750 = 90,125

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