To solve this problem, let's go through each step carefully.

Given Information

1. Initial Cost of Machine: $19,200
2. Estimated Life: 4 years
3. Initial Salvage Value: $1,950
4. Straight-Line Depreciation

After two years:

• Revised Salvage Value: $1,500
• Remaining Useful Life: 3 years

Required 1: Compute Book Value at the End of Year 2

For straight-line depreciation, the formula is:

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

Step 1: Calculate initial annual depreciation: $\text{Annual Depreciation} = \frac{19,200 - 1,950}{4} = \frac{17,250}{4} = 4,312.5$

Step 2: Compute depreciation over the first two years: $\text{Depreciation for 2 years} = 4,312.5 \times 2 = 8,625$

Step 3: Calculate Book Value at the end of Year 2: $\text{Book Value at end of Year 2} = \text{Initial Cost} - \text{Depreciation for 2 years}$ $= 19,200 - 8,625 = 10,575$

So, the book value at the end of the second year is $10,575.

Required 2: Revised Depreciation for Years 3–5

Now that the machine has a revised salvage value and remaining useful life, let's compute the new depreciation.

1. Book Value at Point of Revision (start of Year 3): $10,575
2. Revised Salvage Value: $1,500
3. Remaining Useful Life: 3 years

Step 1: Calculate Remaining Depreciable Cost

$\text{Remaining Depreciable Cost} = \text{Book Value at Point of Revision} - \text{Revised Salvage Value}$ $= 10,575 - 1,500 = 9,075$

Step 2: Calculate Revised Annual Depreciation (for Years 3–5)

$\text{Revised Annual Depreciation} = \frac{\text{Remaining Depreciable Cost}}{\text{Remaining Useful Life}}$ $= \frac{9,075}{3} = 3,025$

Therefore, the revised annual depreciation for each of the final three years is $3,025.

Summary of Answers

• Book Value at End of Year 2: $10,575
• Revised Annual Depreciation (Years 3–5): $3,025

Would you like more details on any of these calculations or have questions?

Here are 5 related questions to expand on this topic:

1. How would the depreciation change if the salvage value was increased instead of decreased?
2. What would the book value be at the end of Year 4 using the revised depreciation?
3. How would double-declining balance depreciation compare with straight-line in this scenario?
4. If the useful life was extended to 5 years, how would the depreciation calculation change?
5. How would you calculate accumulated depreciation at the end of Year 5?

Tip: When using straight-line depreciation, always review the salvage value and useful life regularly, as changes will impact annual depreciation.