Dependable Motors just purchased some MACRS five-year property at a cost of $216,000. The MACRS rates are .2, .32, and .192 for Years 1 to 3, respectively. Assume the firm opted to forego any bonus depreciation. Which one of the following will correctly give you the book value of this equipment at the end of Year 2?
A) $216,000/(1 + .2 + .32)
B) $216,000(1 − .2 − .32)
C) $216,000(.20 + .32)
D) [$216,000(1 − .20)](1 − .32)
E) $216,000[(1 + .20)(1 + .32)]

Question

Quizplus · Accepted Answer

The book value at the end of Year 2 is calculated by subtracting the depreciation of the first two years from the initial cost. The depreciation rates for the first two years are .2 and .32, so the book value is $216,000 * (1 - .2 - .32).

Dependable Motors Just Purchased Some MACRS Five-Year Property at a Cost