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Homework answers / question archive / A company purchased a machine for $970,000
A company purchased a machine for $970,000. The machine has a useful life of 12 years and a residual value of $4,500. It is estimated that the machine could produce 1,000,000 units over its useful life. In the first year, 200,000 units were produced. In the second year, production increased to 300,000 units. Using the units-of- production method, what is the book value of this asset at the end of the second year of operations?
a. $482,750
b. $487,250
c. $485,000
d. $291,000
e. $289,650
Answer: b .
Correct options is "B"
= Purchased machine - salvage value
= $970000 - $4500
= $965500
Produced units = 200000 + 300000
= 500000
Capacity remaining = 1000000 - 500000
= 500000
Book value = (500000 / 1000000) * 965500 + $4500
Book value = $487250
