Homework Answers
| Year | Adjusted Basis | Rate % | Depreciation | Cumulative | Book Value | Method | |||
| 1 | 40,000 | 15 | 6,000 | (40,000*15%) | 6,000 | 34,000 | DB | DB = declining balance method | |
| 2 | 34,000 | 25.5 | 10,200 | (40,000*25.5%) | 16,200 | 23,800 | DB | SL = Straith line method | |
| 3 | 23,800 | 17.85 | 7,140 | (40,000*17.85%) | 23,340 | 16,660 | DB | ||
| 4 | 16,660 | 16.66 | 6,664 | (40,000*16.66%) | 30,004 | 9,996 | SL | ||
| 5 | 9,996 | 16.66 | 6,664 | (40,000*16.66%) | 36,668 | 3,332 | SL | ||
| 6 | 3,332 | 8.33 | 3,332 | (40,000*8.33%) | 40,000 | 0 | SL |
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Question 3 (10 points):
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):
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