Question

1. (20 points) Mr. Jones has recently purchased 5 head of cattle (meaning, 5 cows) for $20,000. Using MACRS depreciation, most livestock are considered to have a 5-year recovery period. Mr. Jones expects to be able to sell the cattle for $5.,000 after the last depreciation period. Assuming uld use a 5-year recovery period for each depreciation method, calculate the depreciation schedule (yearly depreciation amounts) using (a) the straight-line method; (b) the double-declining balance (DDB) method, and (c) the GDS schedule.

Answer 1

Given data rightarrow Mr. Jones has recently purchased 5 head of Cattle (5 cows) for $ 20,000 using MACRS depreciation rightarrow Live stock are considered to have 5 year recovery period rightarrow Mr. Jones expects able to sell the cattle for $ 5000., after last depreciation method \r\n DDB Method: SLM depreciation rate = 1/useful life = 1/5 = 0.2 DDB depreciation rate = 2 times 0.2 = 0.4 Depreciation schedule is as follows: This method ignores Salvage value \r\n MACRS Method: This method ignores salvage value. MACRS description schedule is as follows