Question

3.) Turtle Company purchased a machine for $49,600 and incurred an additional $2,456 in costs necessary for installation and setup of the machine. The machine is expected to last for 5 years or 175,560 machine-hours. At the end of the machine's useful life, it can be scrapped for an estimated $774.

The machine was used for 37,665 machine-hours in the first year and 46,939 machine-hours in the second year, calculate the machine's book value after two years of depreciation expense have been recorded using the activity method of depreciation. Round your answer to the nearest dollar.

4.) Turtle Company purchased a machine for $28,063. The machine is expected to last for 9 years or 137,771 machine-hours. At the end of the machine's useful life, it can be scrapped for an estimated $2,316.

The machine was used for 35,175 machine-hours in the first year and 31,220 machine-hours in the second year, calculate the machine's total accumulated depreciation after two years of depreciation expense have been recorded using the activity method of depreciation. Round your answer to the nearest dollar.

5.) Rodent Company purchased a machine for $32,365. The machine is expected to last for 15 years or 151,884 machine-hours. At the end of the machine's useful life, it can be scrapped for an estimated $1,106.

Calculate the machine's book value after the third year's depreciation expense has been recorded using the straight-line method of depreciation. Round your answer to the nearest dollar.

Answer 1

3.

Value of machine to be depreciated over the life of machine = Purchase cost of machine + Installation & Setup cost - Salvage Value at the end

Value of machine to be depreciated = $49,600 + $2,456 - $774

= $51,282

Basis of recording depreciation = Activity based depreciation

Life of machinery based on activity = 175,560 machine hours

Rate of depreciation per hour = Value of machinery / Level of Activity

= $51,282 / 175,560 machine hours

= $0.29 per machine hour

Depreciation recorded in 2 years = Total hours the machine was used * Rate of depreciation per hour

= (37,665 + 46,939) * $0.29

= 84,604 hours @ $0.29 per hour

= $24,535.16 i.e. $24,535

Book Value of machinery after 2 years = Value of Machinery - Depreciation recorded in 2 years

= $51,282 - $24,535

= $26,747

4.

Value of machine to be depreciated over the life of machine = Purchase cost of machine - Salvage Value at the end

Value of machine to be depreciated = $28,063 - $2,316

= $25,747

Basis of recording depreciation = Activity based depreciation

Life of machinery based on activity = 137,771 machine hours

Rate of depreciation per hour = Value of machinery / Level of Activity

= $25,747 / 137,771 machine hours

= $0.187 per machine hour

Depreciation recorded in 2 years = Total hours the machine was used * Rate of depreciation per hour

= (35,175 + 31,220) * $0.187

= 66,395 hours @ $0.187 per hour

= $12,415.865 i.e. $12,416

Accumulated depreciation on machinery after two years = $12,416

5.

Value of machine to be depreciated over the life of machine = Purchase cost of machine - Salvage Value at the end

Value of machine to be depreciated = $32,365 - $1,106

= $31,259

Basis of recording depreciation = Straight-line method

Life of machinery = 15 years

Annual depreciation to be recorded in books = Value of machinery / Number of years

= $31,259 / 15

= $2,083.93 i.e. $2,084 every year

Book value of machine after 3 years = Value of machine - (Annual depreciation * number of years)

= $31,259 - ($2,084 * 3)

= $31,259 - $6,252

= $25,007