Question

A special-purpose machine is to be depreciated as a linear function of use (units-of-production method). It costs $45000 and is expected to produce 170000 units and then be sold for $8000. Up to the end of the third year, it had produced 60,000 units, and during the fourth year it produced 18,000 units. 1. What is the depreciation deduction for the fourth year? 3918 2. What is the BV at the end of the fourth year? Round to the nearest integer.

Answer 1

Cost of machines	45000
Salvage value	8000
Expected total produce in unit	170000 units
Up to third year , unit of produce	60000
Fourth year produce unit	18000 units

Answer 1:
Depreciation of fourth year=(( number of units produce/life in number of units)*(cost-salvage value))	((18000/170000)*(45000-8000))	3918
Answer 2: the book value at the end of the fourth year
Cost of machine		45000
Less: depreciation of first three year=(( number of units produce/life in number of units)*(cost-salvage value))	((60000/170000)*(45000-8000))	13059
Depreciated value end of third year		31941
Less: fourth year depreciation		3918
The book value at the end of the fourth year		28023