Question

Exercise 8-14A Computing depreciation for tax purposes LO 8-6

Crossroads Eye Care Company purchased $125,700 of equipment on March 1, Year 1.

Year	5-Year Property, %				7-Year Property, %
1		20.00				14.29
2		32.00				24.49
3		19.20				17.49
4		11.52				12.49
5		11.52				8.93
6		5.76				8.92
7						8.93
8						4.46

Required
a. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a seven-year property. (Round your answers to the nearest whole dollar amount.)

b. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a five-year property. (Round your answers to the nearest whole dollar amount.)

Answer 1

Ans: Crossroads Eye Care Company

a) Computation of Depreciation as per MACRS assuming that the equipment is classified as a seven-year property

Year	Cost of the Equipment ($)	Rate of Depreciation (%)	Deprecaition ($)
1	125,700	14.29	17963
2	125,700	24.49	30784

b) Computation of Depreciation as per MACRS assuming that the equipment is classified as a Five-year property

Year	Cost of the Equipment ($)	Rate of Depreciation (%)	Deprecaition ($)
1	125700	20	25140
2	125700	32	40224