The price of a railroad car purchased by Rio Corporation was $78,600. Using the MACRS method, calculate the annual depreciation for year 3. (Round all dollar amounts to the nearest cent)

Question

Quizplus · Accepted Answer

The Modified Accelerated Cost Recovery System (MACRS) is used for depreciation in the United States, and it assigns a specific depreciation rate for each year of an asset's useful life. For railroad cars, the applicable recovery period is typically 7 years, and the MACRS depreciation rates for the first four years are as follows: Year 1: 14.29%, Year 2: 24.49%, Year 3: 17.49%, Year 4: 12.49%. Therefore, for year 3, the depreciation expense is 17.49% of $78,600, which equals $13,747.14 when rounded to the nearest cent.

The Price of a Railroad Car Purchased by Rio Corporation