Amachine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of four years. the company uses straight-line depreciation. calculate its book value at the end of year 3

what is the book value?

a machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of 20,000 machine hours. the company uses units-of-production depreciation and ran the machine 3,000 hours in year 1, 8,000 hours in year 2, and 6,000 hours in year 3.

calculate its book value at the end of year 3.

a machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of four years. the company uses double-declining-balance depreciation.

calculate its book value at the end of year 3.

The NBV for the third year is $40,000, The NBV for the third year is $292,000, The NBV for the third year is $7, 030.40

Explanation:

Straight line method

Cost - Salvage value/number of years

400,000-40,000/3

= 360,000/3

= 120,000

$

Ist year cost. 400,000

Less: Depreciation. 120,000

2nd year 280,000

Less:Depreciation. 120,000

3rd year. 160,000

Less:Depreciation. 120,000

Total. 40,000

Profit and Loss Account

Ist year provision for deprecation 280;000

2nd year provision for depreciation 160,000

3rd year provision for depreciation 40,000

$

$ $ $

1st year. Cost. Dep. NBV

400,000. 120,000. 280,000

2nd year. 280,000 120,000. 160,000

3rd year. 160,000. 120,000 40,000

Balance Sheet

Net Book value : This is the cost of the asset less depreciation to date.

Machine hour method

Depreciation per hour = Cost of machine - Salvage value /Total machine hour

400,000-40,000/20,000

=360,000/20,00. = $ 18

Depreciation for year 1= 18*3,000= $54,000

Depreciation for year 2= 18*1,8,000= $324,000

Depreciation for year 3= 18*6,000= $ 108,000

Balance sheet

$ $ $

Year Cost. Dep. NBV

1st year. 400,000 54,000. 436,000

2nd year. 400,000. 324,000. 76,000

3rd year. 400,000. 108,000. 292,000

Reducing balance method

Reducing balance method

To calculate the rate, we use the formula

r= 1-n√S/C where

r= rate of depreciation

S= Salvage value

C=Cost of the asset

n= number of years

r= 1-4√ 40,000/400,000

= 1-4√0.1

= 0.26

= 1- 0.26

= 0.74

= 0.74 × 100

= 74%

Therefore the rate is 74%

$

Ist year 74% of 400,000. 400,000

296,000

2nd year 74% of 104,000. 104,000

76,960

3rd year 74% of 27,040. 27,040

20,009.6

4th year 74% of 7,030.4. 7,030.4

5,202.49

Total. 1,827.90

Profit and Loss Account

$

Ist year profit and loss 296,000

2nd year profit and loss 76,960

3rd year profit and loss 20,009.60

4th year profit and loss 5,202.49

Balance Sheet

$ $ $

Year. Cost. Dep. NBV

1. 400,000. 296,000. 104,000

2. 104,000 76,960. 27,040

3. 27,040. 20,009.60. 7,030.40

4. 7,030.40. 5,202.49. 1,827.90

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