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Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine's second-year depreciation and year end book value under the straight-line method. Straight-Line Depreciation Annual Depreciation Expense Choose Numerator: / Choose Denominator: = Depreciation expense Year 2 Depreciation Year end book value (Year 2)

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine's second-year depreciation and year end book value under the straight-line method. Straight-Line Depreciation Annual Depreciation Expense Choose Numerator: / Choose Denominator: = Depreciation expense Year 2 Depreciation Year end book value (Year 2)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Determining Depreciation and Book Value Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine’s second-year depreciation and year-end book value under the straight-line method. #### Straight-Line Depreciation | Choose Numerator: | / | Choose Denominator: | = | Annual Depreciation Expense | |----------------------------------|---|---------------------------------|---|--------------------------------| | | / | | = | Depreciation expense | | | / | | | | / | | | Year 2 Depreciation | | | Year end book value (Year 2) | | **Explanation:** 1. **Choose Numerator:** Identify the cost of the machine and subtract the salvage value. - Formula: (Cost of Machine - Salvage Value) 2. **Choose Denominator:** Identify the useful life of the machine in years. - Formula: Useful Life in Years 3. **Annual Depreciation Expense:** Divide the numerator by the denominator to calculate yearly depreciation. - Formula: (Cost of Machine - Salvage Value) / Useful Life in Years 4. **Year 2 Depreciation:** Enter the calculated annual depreciation expense. 5. **Year End Book Value (Year 2):** Subtract the cumulative depreciation (up to Year 2) from the initial cost of the machine. - Formula: (Initial Cost of Machine – (Annual Depreciation Expense * Number of Years)) Using the details provided: - **Cost of Machine:** $83,600 - **Salvage Value:** $4,000 - **Useful Life:** 20 years Calculation: 1. **Numerator:** \( 83,600 - 4,000 = 79,600 \) 2. **Denominator:** \( 20 \) 3. **Annual Depreciation Expense:** \( 79,600 / 20 = 3,980 \) Therefore: - **Year 2 Depreciation:** \( 3,980 \) - **Year End Book Value (Year 2):** \( 83
Transcribed Image Text:### Determining Depreciation and Book Value Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine’s second-year depreciation and year-end book value under the straight-line method. #### Straight-Line Depreciation | Choose Numerator: | / | Choose Denominator: | = | Annual Depreciation Expense | |----------------------------------|---|---------------------------------|---|--------------------------------| | | / | | = | Depreciation expense | | | / | | | | / | | | Year 2 Depreciation | | | Year end book value (Year 2) | | **Explanation:** 1. **Choose Numerator:** Identify the cost of the machine and subtract the salvage value. - Formula: (Cost of Machine - Salvage Value) 2. **Choose Denominator:** Identify the useful life of the machine in years. - Formula: Useful Life in Years 3. **Annual Depreciation Expense:** Divide the numerator by the denominator to calculate yearly depreciation. - Formula: (Cost of Machine - Salvage Value) / Useful Life in Years 4. **Year 2 Depreciation:** Enter the calculated annual depreciation expense. 5. **Year End Book Value (Year 2):** Subtract the cumulative depreciation (up to Year 2) from the initial cost of the machine. - Formula: (Initial Cost of Machine – (Annual Depreciation Expense * Number of Years)) Using the details provided: - **Cost of Machine:** $83,600 - **Salvage Value:** $4,000 - **Useful Life:** 20 years Calculation: 1. **Numerator:** \( 83,600 - 4,000 = 79,600 \) 2. **Denominator:** \( 20 \) 3. **Annual Depreciation Expense:** \( 79,600 / 20 = 3,980 \) Therefore: - **Year 2 Depreciation:** \( 3,980 \) - **Year End Book Value (Year 2):** \( 83
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