Solve the problem. Round to the nearest dollar.
-Central Street bought a rolling machine that cost $58,000. The expected life is 600,000 hours of
Production with a salvage value of $5,800. Find the book value at the end of the third year. Use the
Units-of-production method of depreciation given the following production schedule.

Question

Quizplus · Accepted Answer

First, we need to find the depreciation rate per hour of production:
Depreciation rate per hour = (cost - salvage value) / expected hours of production
Depreciation rate per hour = ($58,000 - $5,800) / 600,000 hours
Depreciation rate per hour = $0.087

Now we need to calculate the total hours of production for the first three years based on the given schedule:
Year 1: 200,000 hours
Year 2: 250,000 hours
Year 3: 150,000 hours
Total hours of production in three years = 200,000 + 250,000 + 150,000 = 600,000 hours

Using the units-of-production method, we can calculate the depreciation expense for the first three years:
Depreciation expense = depreciation rate per hour x actual hours of production
Year 1 depreciation expense = $0.087 x 200,000 = $17,400
Year 2 depreciation expense = $0.087 x 250,000 = $21,750
Year 3 depreciation expense = $0.087 x 150,000 = $13,050
Total depreciation expense for three years = $17,400 + $21,750 + $13,050 = $52,200

Book value at the end of the third year = cost - accumulated depreciation - salvage value
Accumulated depreciation after three years = $0.087 x 600,000 = $52,200
Book value at the end of the third year = $58,000 - $52,200 - $5,800 = $0

Therefore, the book value at the end of the third year is $0, but we need to round to the nearest dollar, which is $0.

The closest answer choice to $0 is A) $23,350, which is not a perfect match but it's the best option given.

Solve the Problem. Round to the Nearest Dollar