Question

1. A three-year-old machine has a cost of $17,200, an estimated residual value of $1,200, and an estimated useful life of 32,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,400 hours in year 1; 7,750 hours in year 2; and 7,900 hours in year 3. Calculate the net book value at the end of the third year.

2. A three-year-old machine has a cost of $63,000, an estimated residual value of $5,800, and an estimated useful life of five years. The company uses double-declining-balance depreciation. Calculate the net book value at the end of each year.

Please show your work

Answer 1

1)	Depreciation rate = (17200-1200)/32000
			0.5	per machine hour
		Accumulated depreciation = (3,400+7,750+7900)*$.5
					9525
		Net book value at the end of third year
		orginal cost				17200
		less:Accumulate depreciation				-9,525
		Net book value at the end of third year				7675	answer
2)	Depreciation rate = 1/5*2=			0.4	or 40%
		cost	Dep	Net value
	year 1	63,000	25200	37800
	year 2	37,800	15120	22680
	year 3	22,680	9072	13,608
		Net book value at year end $13,608				anser