Roche Biotech provides company cars for its salespeople that cost an average of $25,000. Using the class recovery system of five years, what is the depreciation expense in year 2 of the MACRS?

Question

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The Modified Accelerated Cost Recovery System (MACRS) allows for faster depreciation in the early years of an asset's life. For a 5-year class asset, the MACRS depreciation rates are as follows: Year 1 - 20%, Year 2 - 32%, Year 3 - 19.2%, Year 4 - 11.52%, Year 5 - 11.52%, and Year 6 - 5.76%. Therefore, in year 2, the depreciation expense would be 32% of $25,000, which equals $8,000.

Roche Biotech Provides Company Cars for Its Salespeople That Cost