Question

Central Street bought a rolling machine that cost $76,000. The expected life is 700,000 hours of production with a salvage value of $7600. Find the book value at the end of the third year. Use the units-of-production method of depreciation given the following production schedule. Year 1 175,000 hours Year 2 171,000 hours Year 3 164,000 hours

Answer 1

Answer:

$26,166

Explanation:

As for the provided information using units of production method, we have:

Total amount to be depreciated of the machine = Cost - salvage value = $76,000 - $7,600 = $68,400

Total expected working useful hours = 700,000

Depreciation per hour = $68,400/700,000 = $0.097714

Depreciation for year 1 = $0.097714 $\times$ 175,000 = $17,100

Depreciation for year 2 = $0.097714 $\times$ 171,000 = $16,709

Depreciation for year 3 = $0.097714 $\times$ 164,000 = $16,025

Total depreciation = $49,834

Carrying book value = $76,000 - $49,834 = $26,166