value: 0.52 points M9-4 Computing Book Value (Straight-Line Depreciation) [LO 9-

Question

value: 0.52 points M9-4 Computing Book Value (Straight-Line Depreciation) [LO 9-3] A machine that cost $770,000 has an estimated residual value of $70,000 and an estimated useful life of seven years. The company uses straight-line depreciation. Calculate its book value at the end of year 6 (Do not round intermediate calculations.) Value References eBook & Resources Worksheet Difficulty: 1 Easy M9-4 Computing Book Value (Straight-Line Depreciation) [LO 9-3] Leaning Objective: 09-03 Apply various depreciation methods as economic benefits are used up over time. Check my work

Explanation / Answer

Answer M9-4 Calculation of book value at the end of Year 6 Depreciation per year using Straight line method = (Cost - residual value)/Useful life in years Depreciation per year using Straight line method = ($770000 - $70000)/7 years = $1,00,000 Book value at the end of Year 6 = Cost of machine - Depreciation for 6 years Book value at the end of Year 6 = $770000 - $600000 = $1,70,000 Answer M9-5 Calculation of book value at the end of Year 3 Depreciation per machine hour = (Cost - residual value)/Estimated useful life in machine hours Depreciation per machine hour = ($169000 - $13000)/13000 machine hours = $12 per machine hour Book value of machine at the end of Year 3 = Cost - Depreciation for 3 years Book value of machine at the end of Year 3 = $169000 - (3000 hours*$12) - (4000 hours*$12) - (3000 hours*$12) Book value of machine at the end of Year 3 = $49,000 Answer M9-6 Depreciation using double declining balance method = 2 * straight line depreciation rate * book value of machine at the beginning of the year Depreciation per year using Straight line method = (Cost - residual value)/Useful life in years = ($200000-$20000)/4 years = $45,000 Straight line depreciation rate = Depreciation per year / Depreciable value = $45000/$180000 = 25% Depreciation for year 1 = 2*25%*$200000 = $100000 Depreciation for Year 2 = 2*25%*$100000 = $50000 Depreciation for Year 3 = 2*25%*$50000 = $25000 Book value of machine at the end of Year 3 = Cost - Depreciation for 3 years Book value of machine at the end of Year 3 = $200000 - $175000 = $25000

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