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Cost 920000, residual value 20000,
Estimated life in machine hrs 6000.
Hrs used: in year 1 1200hrs, in year 2 1800hrs, in year 3 850hrs.
At the start of the third year company decided to upgrade the machine by adding new components at cost of $200000. this led to reduction in the production time per unit of the goods being manufactured using the machine.upgrade also increased the estimated remaining useful life of machine at start of third year to 4500 machine hrs and estimated residual value was revised to $40000.
Could you please kindly explain how to calculate the depreciation for third yearMisread the question first time! I took the original cost to be 92,000 instead of 920,000!
Depreciation first year is 1,200 / 6,000 x 900,000 = 180,000 leaving 740,000
Second year is 1,800 / 6,000 x 900,000 = 270,000 leaving 470,000 carrying value
Following addition carrying value is now 670,000 but residual value brings depreciate amount to 630,000
Third year is 850 / 4,500 x 630,000 = 119,000
Ok?
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