Question

The Eimac tubes in a linear amplifier for radio transmission are estimated to provide 18,000 hours of operation before requiring replacement. A pair of tubes costs $20,000 and has no salvage value. Their use, expressed in hours over a 4-year period, is (1) 2,500, (2) 4,500, (3) 3,000, and (4) 3,900. Determine the current book value based upon the operating hour method of depreciation.

Answer 1

The current book value of the Eimac tubes is $4,555.56, calculated using the operating hour method of depreciation after accounting for 13,900 hours of use.

Step-by-step explanation:

To calculate the current book value of the Eimac tubes in a linear amplifier using the operating hour method of depreciation, we first need to determine the total hours of use over the 4-year period. We then find the rate of depreciation per hour by dividing the initial cost of the tubes by their estimated operational lifespan. Finally, we find the accumulated depreciation by multiplying the depreciation rate per hour by the total hours of use, and subtract this from the initial cost to get the current book value.

1. Calculate the total hours of use: (1) 2,500 + (2) 4,500 + (3) 3,000 + (4) 3,900 = 13,900 hours.
2. Calculate the depreciation rate per hour: $20,000 / 18,000 hours = $1.1111 per hour.
3. Calculate the accumulated depreciation: $1.1111 per hour × 13,900 hours = $15,444.44.
4. Determine the current book value: $20,000 - $15,444.44 = $4,555.56.

The current book value of the Eimac tubes is therefore $4,555.56.