Compatibility Services acquired an $80,000 machine on January 1,20X3.The machine is estimated to have a useful life of 8 years,and a residual value of $4,000.For units-of-production depreciation purposes,the machine is expected to produce 400,000 units.If Compatibility Services uses units-of-production depreciation,and the company produces 40,000 units in 20X3; 60,000 units in 20X4; 50,000 units in 20X5; and 30,000 units in 20X6; what is the net book value of the machine at December 31,20X6?
A)$40,000
B)$48,000
C)$42,000
D)$45,800
E)$49,600

Question

Quizplus · Accepted Answer

Depreciation expense for 20X3 = ($80,000 - $4,000) x (40,000/400,000) = $19,200Depreciation expense for 20X4 = ($80,000 - $4,000) x (60,000/400,000) = $28,800Depreciation expense for 20X5 = ($80,000 - $4,000) x (50,000/400,000) = $24,000Depreciation expense for 20X6 = ($80,000 - $4,000) x (30,000/400,000) = $14,400Net book value at December 31, 20X6 = $80,000 - $19,200 - $28,800 - $24,000 - $14,400 = $45,800

Compatibility Services Acquired an $80,000 Machine on January 1,20X3