A machine costing $5000 is estimated to have a useful lifetime of 5 years and a scrap value of $500.It is expected to run for 20,000 hours.You are given that the actual production hours in the first three years are: 5000 in year 1,4400 in year 2,and 4000 in year 3.What is the book value of this machine at the end of three years?

Question

Quizplus · Accepted Answer

The depreciation per hour is calculated as (Cost - Scrap Value) / Total Hours = ($5000 - $500) / 20000 = $0.225 per hour. Total hours for the first three years are 5000 + 4400 + 4000 = 13400 hours. Depreciation for 13400 hours is 13400 * $0.225 = $3015. The book value after three years is Cost - Depreciation = $5000 - $3015 = $1985.

A Machine Costing $5000 Is Estimated to Have a Useful