Question

Machine A costs $750,000 and depreciates on a 15-year schedule. Machine B costs $480,000 and depreciates on a 24-year schedule. Which machine has a higher Net Fixed Asset value on the Balance Sheet in year 10?

Answer 1

Answer:

Machine B has higher Net Fixed Asset Value

Explanation:

Computing the Net Fixed Asset Value using the formula as:

For Machine A

Net Fixed Asset Value (NFA) = Cost - Depreciation

where

Cost is $750,000

Depreciation is computed as:

Depreciation = $750,000 / 15 × 10

= $500,000

So,

NFA of machine A = $750,000 - $500,000

= $250,000

For Machine B

Net Fixed Asset Value (NFA) = Cost - Depreciation

where

Cost is $480,000

Depreciation is computed as:

Depreciation = $480,000 / 24 × 10

= $200,000

So,

NFA of machine A = $480,000 - $200,000

= $280,000

Hence, Machine B has the higher value which is $280,000