Question

Jobe Concrete Products placed a new sand sifter into production 3 years ago. It had an installed cost of $100,000, a life of 5 years, and an anticipated salvage of $20,000. Book depreciation charges for the 3 years are $40,000, $24,000, and $14,000, respectively. (a) Determine the book value after 2 years. (b) If the sifter’s market value today is $20,000, determine the difference between its current book value and its market value. (c) Determine the total percentage of the unadjusted basis written off through year 3.

Answer 1

Answer:(a) To determine the book value after 2 years, we need to subtract the total depreciation charges for the first 2 years from the initial installed cost. The depreciation charges for the first 2 years are $40,000 + $24,000 = $64,000.

Therefore, the book value after 2 years is $100,000 - $64,000 = $36,000.

(b) The current book value is the book value after 3 years, which is the initial installed cost minus the total depreciation charges for the 3 years: $100,000 - ($40,000 + $24,000 + $14,000) = $22,000.

The difference between the current book value and the market value is $22,000 - $20,000 = $2,000.

(c) To determine the total percentage of the unadjusted basis written off through year 3, we need to calculate the total depreciation charges for the 3 years and divide it by the initial installed cost. The total depreciation charges for the 3 years are $40,000 + $24,000 + $14,000 = $78,000.

The percentage of the unadjusted basis written off through year 3 is ($78,000 / $100,000) * 100% = 78%.

Step-by-step explanation: