Question

11-51 A computer costs $3500 and its salvage value in 5 years is negligible. What is the book value after 3 years? If the machine is sold for $1500 in Year 5, how much gain or recaptured depreciation is there? Assume (a) Straight-line depreciation (b) Double declining balance depreciation (c) 20% bonus depreciation with the balance using 5-year MACRS

Please help me in Part C, show the result to understand the part (thanks)

Answer 1

What is the book value of after 3 years Depreciation as per MACRS in 5 year Depreciation Rate Depreciation expenses Workings Particulars $ $ Year $ Computer Cost 3500 700 3500*20% 1120 3500*32% 672 3500*19.2% 20.00% Less-Depreciation 1 Year-1 32.00% 700 2 19.20% Year-2 700 3 Year-3 (3500/5-700 per year) 403.2 3500*11.52% 403.2 3500*11.52% 11.52% 700 2100 4 11,52% 5 Total Depreciation as pe MACRS 3298.4 The book value of after 3 years 1400 Computer Cost - Depreciation) If the computer is sold for $1500 in Year 5 $ $ Particulars Computer Cost 3500 Less-Depreciation Year-1 700 Year-2 700 Year-3 Year-4 (3500/5=700 per year) 700 700 2800 The book value in 5 years 700 Computer Cost Depreciation) $ Sale value of Computer А 1500 Less- Book Value of Computer В 700 (А-B) Gain 800