Ramirez company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $85,400. the machine's useful life is estimated at 20 years, or 402,000 units of product, with a $5,000 salvage value. during its second year, the machine produces 34,200 units of product. determine the machine’s second-year depreciation and year end book value under the straight-line method.

The machine’s second-year depreciation and year end book value under the straight-line method is $4020 and $77,360 respectively.

The straight line depreciation method is used by companies to calculate amortization and depreciation. It is good method to determine the loss of value of an asset over a given period.  

You can calculate straight line depreciation by subtracting assets cost from expected salvage value and then divide the derived value by the expected number of years to be used.

This can be expressed as:

Initial cost – salvage value / useful life

From the given question,  

If you substitute the values into the equation, then you have:

$85,400 - $5000 / 20

= $80400 / 20

= $4020

To determine the book value for the second year, then you should subtract the initial value from the derived value when you multiply the years (2) and the depreciation.

This can be expressed as:

Book value = Initial value - (years x depreciation)

= $85,400 - (2 x $4020)

= $77,360

Thus, the machine’s second-year depreciation and year end book value under the straight-line method is $4020 and $77,360 respectively.

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