How did they get these numbers?Homework Answers
Ans : Value of asset = $ 18,000
Under ACRS method, Depreciation is charged on the value with the percentage for each year as shown in column 4.
Book value at each year = Book value in the previous year - depreciation.
| Year | ACRS % | Depreciation | Calculation | Book value | Calculation |
| 1 | 20 | 3600 | 18000*20% | 14400 | 18000-3600 |
| 2 | 32 | 5760 | 18000*32% | 8640 | 14400-5760 |
| 3 | 19.2 | 3456 | 18000*19.2% | 5184 | 8640-3456 |
| 4 | 11.52 | 2073.6 | 18000*11.52% | 3110.4 | 5184-2073.6 |
| 5 | 11.52 | 2073.6 | 18000*11.52% | 1036.8 | 3110.4-2073.6 |
| 6 | 5.76 | 1036.8 | 18000*5.76% | 0 | 1036.8-1036.8 |
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Using the Modified Accelerated Cost Recovery method (table A-1),
calculate the depreciation of $2,500,000 property for 7-year half
-year convention. Note: you just need to calculate the
depreciation; you do not need to use it in any further
calculations.
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 33.33% 44.45 14.81 20.00% 32.00 19.20 11.52 11.52 14.29% 24.49 17.49 12.49 8.93...
Please refer to IRS Publication 946
2. In plain English, explain how depreciation was calculated for
years 1-3.
3. In plain English, explain how depreciation was calculating
for years 4-6 (Hint: See MACRS4 solution, end-of-year basis for
year 3; divide by 5, but you must explain why you divided by
5).
4. Additional comments (optional):
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period 3-year 5-year 7-year 10-year 15-year Year 20-year 33.33%...
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