A tractor costing $80,000 is depreciated using MACRS. The tractor qualifies as a 3-year property, and has a scrap value of $20,000. The depreciation rates are: What is the depreciation expense for year 2?

Question

A tractor costing $80,000 is depreciated using MACRS. The tractor qualifies as a 3-year property, and has a scrap value of $20,000. The depreciation rates are:  What is the depreciation expense for year 2?

Quizplus · Accepted Answer

According to MACRS, the 3-year property class depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. To calculate the depreciation expense for year 2, we need to use the second-year depreciation rate of 44.45% and multiply it by the depreciable cost of the tractor, which is the original cost minus the scrap value:

depreciable cost = $80,000 - $20,000 = $60,000

depreciation expense for year 2 = 44.45% x $60,000 = $26,670

Therefore, the correct answer is B.

A Tractor Costing $80,000 Is Depreciated Using MACRS