A tractor costing $20,000 is depreciated using the Modified Accelerated Cost Recovery System (MACRS). The tractor belongs to 3-year property class and the depreciation rate for Year 1 is 33.33%, for Year 2 is 44.45%, for Year 3 is 14.81%, and for Year 4 is 7.41%. The depreciation expense for Year 3 is:
A) $3,453.
B) $2,962.
C) $4,987.
D) $1,876.

Question

Quizplus · Accepted Answer

To calculate depreciation expense using MACRS, we first need to determine the depreciation basis. This is simply the cost of the asset, which is $20,000 in this case.

To calculate the depreciation expense for Year 3, we need to use the Year 3 depreciation rate of 14.81%. Multiplying this rate by the depreciation basis gives:

$20,000 * 14.81% = $2,962

Therefore, the depreciation expense for Year 3 is $2,962, so the best choice is B.

A Tractor Costing $20,000 Is Depreciated Using the Modified Accelerated