Question

A piece of newly purchased industrial equipment costs $978,000 and is classified as seven-year property under MACRS. The MACR

LLLLLLLLLLLL Year 1 2 3 ooo a AWN + Property Class Three-Year Five-Year 33.33% 20.00% 44.45 32.00 14.81 19.20 7.41 11.52 11.5

An asset used in a four-year project fats in the five-year MACRS dass for tax purposes. The asset has an acquisition cost of

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Answer #1
Solution 1
Year Beginning book value Depreciation rate Depreciation Ending book value
A B C=$ 9,78,000*B D=A-C
1 $                      978,000.00 14.29% $          139,756.20 $         838,243.80
2 $                      838,243.80 24.49% $          239,512.20 $         598,731.60
3 $                      598,731.60 17.49% $          171,052.20 $         427,679.40
4 $                      427,679.40 12.49% $          122,152.20 $         305,527.20
5 $                      305,527.20 8.93% $            87,335.40 $         218,191.80
6 $                      218,191.80 8.92% $            87,237.60 $         130,954.20
7 $                      130,954.20 8.93% $            87,335.40 $           43,618.80
8 $                         43,618.80 4.46% $            43,618.80 $                          -  
Solution 2
Year Beginning book value Depreciation rate Depreciation Ending book value
A B C=$ 6,000,000*B D=A-C
1 $                         6,000,000 20.00% $            1,200,000 $           4,800,000
2 $                         4,800,000 32.00% $            1,920,000 $           2,880,000
3 $                         2,880,000 19.20% $            1,152,000 $           1,728,000
4 $                         1,728,000 11.52% $                691,200 $           1,036,800
WDV at the end of 4 year $          1,036,800
Selling price $          1,200,000
Gain $              163,200
Tax @ 34% $                55,488 (163200*34%)
Selling price after tax $          1,144,512 (1,200,000-55,488)
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