Question

An uninterruptible power system used in a small production facility at Acme Manufacturing has a basis of $56,000 and is expected to have $5750 salvage value after 125,000 hours of use. Calculate the depreciation rate per hour of use and the book value after 77,000 hours of operation.

Answer 1

Answer:

The depreciation rate per hour is 0.402

The Book value is $25,046

Explanation:

In order to calculate the depreciation rate per hour of use we would have to calculate the following:

depreciation rate per hour=(basis- salvage value)/hours of use

depreciation rate per hour=($56,000-$5750)/125,000

depreciation rate per hour=0.402

To calculate the book value we would have to make the following calculation:

Book value=basis-(depreciation rate per hour*77,000 hours of operation)

Book value=$56,000-(0.402*77,000)

Book value=$25,046