Ramirez Company installs a computerized manufacturing machine in its factory at

Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $109,800. The machine’s useful life is estimated at 10 years, or 320,000 units of product, with a $15,600 salvage value. During its second year, the machine produces 30,700 units of product.

Determine the machine’s second-year depreciation and year end book value under the straight-line method.

This is what i have for the first year.

94200/10=9420

Below is the remainder of the problem that I am having trouble answering.

1. Year 2 depreciation

2. Year End book value(2)

Determine the machine’s second-year depreciation and year end book value under the straight-line method.

This is what i have for the first year.

94200/10=9420

Below is the remainder of the problem that I am having trouble answering.

1. Year 2 depreciation

2. Year End book value(2)

Explanation / Answer

Straight Line Depreciation = (Original Cost - Salvage Value) / Useful Life

In straight line depreciation the depreciation every year remains the same.

Straight Line Depreciation = ( 109800 - 15600 ) / 10 = 94200 / 10 = 9420 (remains same for all years)

Hence 2nd Year Depreciation = 9420

Ending Book Value at year end = 2 : Original Cost - Accumulated Depreciation = 109800 - 9420 - 9420 = 90960

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