Question

You just purchased $218,000 of equipment that is classified as five-year MACRS property. The MACRS rates are .2, .32, .192, .1152, .1152, and .0576 for Years 1 to 6, respectively. What will be the book value of this equipment at the end of three years assuming no bonus depreciation is taken?

Answer 1

Answer:

$62,784

Explanation:

With MACRS depreciation , annual depreciation amount is calculated by multiplying each year' s rate by the original cost of the equipment.

Write down  depreciation schedule as follows;

Year              Depreciation              Book value

Yr 1            0.2* 218000= 43600         218000 - 43600 = 174400

Yr2           0.32* 218000 = 69760           174400 - 69760 =104640

Yr3             0.192* 218000 = 41856           104640 - 41856= 62784

Therefore, at the end of 3 years, the book value of the equipment will be $62,784