D&R Company, a calendar year corporation, purchased $1,116,000 of equipment on August 3. This was D&R's only purchase of depreciable property for the year. If the equipment has a 7-year recovery period, refer to Table 7.2 and compute D&R's first and second-year MACRS depreciation. (Disregard the Section 179 deduction and bonus depreciation in making your calculation.) Use Table 7-2.

Question

Quizplus · Accepted Answer

According to Table 7-2, the 7-year MACRS rate is 14.29%. Using this rate, the first-year depreciation is calculated as:
$1,116,000 x 14.29% = $159,476
For the second year, we use the same rate on the remaining depreciable basis, which is the original cost minus the first-year depreciation:
$1,116,000 - $159,476 = $956,524
$956,524 x 14.29% = $136,832
Adding the first and second-year depreciation gives us:
$159,476 + $136,832 = $296,308, which is closest to choice B.

D&R Company, a Calendar Year Corporation, Purchased $1,116,000 of Equipment