Answer:
The book value of the machine at the end of 2019 is $26632795
Explanation:
Unit of Production method:
In this method, the depreciation is calculated based on unit levels like machine hours, direct material,etc instead of useful life.
First we have to calculate annual depreciation based on machine hour. The formula is shown below:
= ( Purchase cost - Residual value ) ÷ machine hours
= ($ 40,600,000 - $50,000) ÷ 27000
= $1501.85
Then, compute the depreciation for 2018 and 2019
Depreciation for 2018 = Annual depreciation × 2018 machine hours
= $1501.85 × 3,600 hours
= $5406660
Depreciation for 2019 = Annual depreciation × 2019 machine hours
= $1501.85 × 5,700 hours
= $8560545
Now, finally the book value can be calculated for 2019 year.
= Purchase cost - depreciation 2018 - depreciation 2019
= $ 40,600,000 - $5406660 - $8560545
= $26632795
Thus, the book value of the machine at the end of 2019 is $26632795
