Question

A machine that cost $644,000 has an estimated residual value of $28,000 and an estimated useful life of 28,000 machine hours. The company uses units-of-production depreciation and ran the machine 8,000 hours in year 1, 10,000 hours in year 2, and 7,000 hours in year 3. Calculate its book value at the end of year 3.

Answer 1

Answer:

94,000

Explanation:

Activity method based on output = (output produced that year / total output of the machine) x (Cost of asset - Salvage value)

( $644,000 - $28,000) / 28,000 = 22

1 = 22 x 8000 =   176,000

2= 22 x 10,000 =  220,000

3 22 x 7000 = 154,000

Book value = cost of asset - accumulated depreciation

$644,000 - (176,00 + 220,000 + 154,000)