MACRS XYZ Company puts in use a computer workstation that costs $20,000. Determine the depreciation schedule as per MACRS.

Question

MACRS

XYZ Company puts in use a computer workstation that costs $20,000. Determine the depreciation schedule as per MACRS.

Table 10.1 MACRS Property Classes

Property Type	Recovery Period (yrs)
Fabricated metal products, special tools for the manufacturing of plastic parts	3
High-tech equip, R&D equip, automobiles, light trucks	5
Office furniture, manufacturing equip, fixtures	7
Railroad cars, barges, vessels, tugs, barges	10
Telephone dist. plant and similar utility products, wastewater plants	15
Electrical power plants, municipal sewers	20
Residential rental property	27.5
Nonresidential property, elevators, escalators	39

Accepted Answer

First refer to Table 10.1 to determine the class the computer workstation belongs to; from there it is a 5-year property. Next refer to Table 10.2 for recovery percentages for a 5-year
property which are:

Recovery Year	1	2	3	4	5	6
Allowable, %	20.00	32.00	19.20	11.52	11.52	5.76

For the workstation costing $20,000, the first-year depreciation will thus be 20% of $20,000 = $4,000. For the second year, it will be 32% of $20,000 = $6,400. Similarly, for the subsequent years they will be $3,840, $2,304, $2,304, and $1,152. The resulting depreciation schedule is:

Year	1	2	3	4	5	6	Total:
Depreciation	$4,000	$6,400	$3,840	$2,304	$2,304	$1,152	$20,000

Note that the total depreciation charged is $20,000, exactly equal to the investment cost to be recovered. Checking the total depreciation to ensure the accuracy of results is always desirable.

Table 10.2 MACRS [latex]Recovery^{1}[/latex] Percentages

Class	3-yr	5-yr	7-yr	10-yr	15-yr	20-yr
Year
1	33.33	20	14.29	10	5	3.75
2	44.45	32	24.49	18	9.5	7.219
3	14.81*	19.2	17.49	14.4	8.55	6.677
4	7.41	11.52*	12.49	11.52	7.7	6.177
5		11.52	8.93*	9.22	6.93	5.713
6		5.76	8.92	7.37	6.23	5.285
7			8.93	6.55*	5.90*	4.888
8			4.46	6.55	5.9	4.522
9				6.56	5.91	4.462*
10				6.55	5.9	4.461
11				3.28	5.91	4.462
12					5.9	4.461
13					5.91	4.462
14					5.9	4.461
15					5.91	4.462
16					2.95	4.461
17						4.462
18						4.461
19						4.462
20						4.461
21						2.231

[latex]^{1}[/latex] The percentages begin as declining balance. The 15-year and 20-year properties are based on 150%, while the other four on 200% (DDB). The percentages change to straight-line at the asterisked point .

Question 10.9: MACRS XYZ Company puts in use a computer workstation that co...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions