Question

Better Chocolates has a new project that requires $838,000 of equipment. What is the depreciation in Year 6 of this project if the equipment is classified as seven-year property for MACRS purposes? The MACRS allowance percentages are as follows, commencing with year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Answer 1

Answer:

d. $74,749.60 ( depreciation allowance @ 8.92% )

Explanation:

Under Modified Accelerated Cost Recovery System the Office furniture and fixtures, agricultural machinery and equipment, any other property not associated with another class is classified as 7-years property.

These assets are depreciated as follows:

Year         Percentage Depreciate

  1                              14.29%

  2                             24.49%

  3                             17.49%

  4                             12.49%

  5                             8.93%

  6                             8.92%

  7                             8.93%

  8                             4.46%

In the Sixth year depreciation will be charged by 8.92%.

Asset Value = $838,000

Depreciation Allowance in 6th year = $838,000 x 8.92%

Depreciation Allowance in 6th year = $74749.60

*Option for the given Mcqs are missing and written as follows:

Select one:

a. $80,411.60

b. $74,833.40

c. $89,108.00

d. $74,749.60

e. $89,327.08