Question

UP PUSS * Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 33% 20% 14% 45% 32% 25% 15% 18% 7% 12% OWN 10 years 10% 18% 14% 12% 9% 8% 9% 9% 7% 6% Print Done

Answer 1

Following is the depreciation schedule:

Year	Opening balance	Investment	Depreciation Percentage	Depreciation	Closing balance
0		315000			315000
1	315000		20%	63000	252000
2	252000		32%	100800	151200
3	151200		19%	59850	91350
4	91350		12%	37800	53550
5	53550		12%	37800	15750
6	15750		5%	15750	0

• Opening balance = previous year's closing balance
• Closing balance = Opening balance+Investment-Depreciation
• Depreciation = Depreciation percentage x Investment
• At the end of the 2 years the closing balance or the book value is 151200
• If SP is 210000, then profit is 210000-151200 = 58800
• After tax proceeds = SP x (1-tax rate)
  • After tax proceeds = 210000 x (1-0.40)
  • After tax proceeds = 126000
• Initial investment = Cost of new machine - After tax proceeds
  • Initial investment = 492000- 126000
  • Initial investment = 492000- 126000
  • Initial investment = 366000