Question

11-3. Office equipment whose initial cost is $100,000 has an estimated actual life of 6 years, with an estimated salvage value of $10,000. Prepare tables listing the annual costs of depreciation and the book value at the end of each 6 years, based on straight-line and MACRS depreciation.

Answer 1

The amount of depreciation using straight line method

$\large Dep =\frac{100,000 - 10,000}{6} = \$ \ 15,000$

Straight Line Method

Year	Beginning of Year	Depreciation	Book Value End of Year
1	$ 100,000	$ 15,000	$ 85,000
2	$ 85,000	$ 15,000	$ 70,000
3	$ 70,000	$ 15,000	$ 55,000
4	$ 55,000	$ 15,000	$ 40,000
5	$ 40,000	$ 15,000	$ 25,000
6	$ 25,000	$ 15,000	$ 10,009

Calculation of MACRS depreciation

MACRS

Year	BV	Depreciation rate	Depreciation Charge	Book Value EoY
1	$ 100,000	20%	$ 20,000	$ 80,000
2	$ 100,000	32%	$ 32,000	$ 48,000
3	$ 100,000	19.2%	$ 19,200	$ 28,800
4	$ 100,000	11.52%	$ 11,520	$ 17,280
5	$ 100,000	11.52%	$ 11,520	$ 5,760
6	$ 100,000	5.76%	$ 5,760	$ 0

Here I have considered a 5 year property class.