On 1 January 2013, Zane Manufacturing Company purchased a machine for $40 000. The company expects to use the machine a total of 24 000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4 000. The company used the machine 8 000 hours in 2013 and 12 000 in 2014. What is the carrying amount of the machine at the end of 2014 if the company uses reducing- balance depreciation?

Question

Quizplus · Accepted Answer

The reducing-balance method applies a constant depreciation rate to the declining book value. First, calculate the depreciation rate: (1 - (4000/40000)^(1/6)) = 0.259. For 2013, depreciation is 0.259 * 40000 = $10,360. For 2014, depreciation is 0.259 * (40000 - 10360) = $7,073. The carrying amount at the end of 2014 is 40000 - 10360 - 7073 = $18,567.

On 1 January 2013, Zane Manufacturing Company Purchased a Machine