An uninterruptible power system used in a small production facility at Acme Manufacturing has a basis of $56,000 and is expected to have $5750 salvage value after 125,000 hours of use. Calculate the depreciation rate per hour of use and the book value after 77,000 hours of operation.

The depreciation rate per hour is 0.402

The Book value is $25,046

Explanation:

In order to calculate the depreciation rate per hour of use we would have to calculate the following:

depreciation rate per hour = (basis - salvage value) / hours of use

depreciation rate per hour = ($56,000-$5750) / 125,000

depreciation rate per hour=0.402

To calculate the book value we would have to make the following calculation:

Book value=basis - (depreciation rate per hour*77,000 hours of operation)

Book value=$56,000 - (0.402*77,000)

Book value=$25,046