A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an...

A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an estimated useful life of 33,000 machine hours. The company uses units-of-production depreciation and ran the machine 4,400 hours in year 1; 8,050 hours in year 2; and 8,200 hours in year 3. Calculate the net book value at the end of the third year.

Expert Solution

All working forms part of the answer
Working

A	Cost	$ 19,100.00
B	Residual Value	$ 2,600.00
C=A - B	Depreciable base	$ 16,500.00
D	Usage	33,000 machine hours
E	Depreciation expense	$ 0.50 per machine hour

Year	Book Value	Usage	Depreciation expense	Ending Book Value
	[A]	[B]	[C = B x $ 0.50]	[D = A – C]
1	$ 19,100.00	4,400	$ 2,200.00	$ 16,900.00
2	$ 16,900.00	8,050	$ 4,025.00	$ 12,875.00
3	$ 12,875.00	8,200	$ 4,100.00	$ 8,775.00 = Answer

Answer: Net Book Value at the end of 3^rd Year = $ 8,775

ekkarill92 answered 2 years ago

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