Question

Woodland Lake Manufacturing has a new project that requires $652,000 of equipment. What is the depreciation in Year 5 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: $58,223.6‬0

Explanation:

The Modified Accelerated Cost Recovery System (MACRS) is the depreciation method being used currently in the United States to depreciate assets for tax purposes. The asset is depreciated over a certain period of time depending on the Assets class.

The equipment in this scenario is a 7-year property and is subject to the rates listed. The fifth year depreciation therefore is;

= 652,000 * 8.93%

= $58,223.6‬0