Question

A machine that cost $192,000 has an estimated residual value of $24,000 and an estimated useful life of 24,000 machine hours. The company uses units-of-production depreciation and ran the machine 6,000 hours in year 1, 7,000 hours in year 2, and 8,000 hours in year 3.

Answer 1

Value at the end of year 3 = $45,000

Step-by-step explanation:

Here provided, depreciation will be based on the useful life that is machine hours. Total expected machine hours = 24,000

Value to be Depreciated = $192,000 - $24,000 = $168,000

Thus depreciation for each hour = $168,000/24,000 = $7 per hour

Depreciation for year 1 = $7
`*` 6,000 hours = $42,000

Value at year end = $192,000 - $42,000 = $150,000

Depreciation for year 2 = $7
`*` 7,000 hours = $49,000

Value at year end = $150,000 - $49,000 = $101,000

Depreciation for year 3 = $7
`*` 8,000 hours = $56,000

Value at year end = $101,000 - $56,000 = $45,000

Assumed: Here that the student wants to know the value at the end of year 3.