To calculate the book value of the machine at the end of the third year, we need to apply the straight-line depreciation method, which is calculated as:

$\text{Annual Depreciation} = \frac{\text{Cost of Machine} - \text{Salvage Value}}{\text{Useful Life}}$

Given:

• Cost of Machine = ₱800,000
• Salvage Value = ₱50,000
• Useful Life = 5 years

First, let's calculate the annual depreciation:

$\text{Annual Depreciation} = \frac{₱800,000 - ₱50,000}{5} = \frac{₱750,000}{5} = ₱150,000 \, \text{per year}$

Next, we calculate the book value at the end of the third year. The formula for book value is:

$\text{Book Value at the End of Year} = \text{Cost of Machine} - (\text{Annual Depreciation} \times \text{Number of Years})$

At the end of the third year:

$\text{Book Value at the End of Year 3} = ₱800,000 - (₱150,000 \times 3)$

$\text{Book Value at the End of Year 3} = ₱800,000 - ₱450,000 = ₱350,000$

Final Answer:

The book value of the machine at the end of the third year is ₱350,000.

Would you like further explanation or details? Here are 5 related questions for deeper understanding:

1. How would you calculate depreciation using the declining balance method?
2. What is the difference between book value and market value?
3. How can salvage value affect the depreciation expense?
4. What are the tax implications of depreciation on business equipment?
5. How would you adjust the book value if the machine was sold before the end of its useful life?

Tip: Always ensure that the salvage value is realistic, as it directly impacts the depreciation calculation.