A company buys two machines.Machine A is expected to last 14 years and costs $2450.Machine B is expected to last 10 years and costs $Y.Both machines have a salvage value of $1050 and both use the straight line method of depreciation.At the end of the 9^th year,machine A and machine B have a same book value.What is Y?

Question

Quizplus · Accepted Answer

The correct answer is A.The book value of a machine is its cost minus its accumulated depreciation. For machine A, the accumulated depreciation at the end of the 9th year is (2450 - 1050) * 9/14 = $900. For machine B, the accumulated depreciation at the end of the 9th year is (Y - 1050) * 9/10. Since the book values of the two machines are the same at the end of the 9th year, we have:2450 - 900 = Y - 1050 * 9/101550 = Y - 945Y = $6050

A Company Buys Two Machines