Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar.
-Marcus McGuire purchased a rental duplex (27.5-year property)for $101,000. Find its book value
At the end of 5 years.

Question

Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar. 
-Marcus McGuire purchased a rental duplex (27.5-year property)for $101,000. Find its book value
At the end of 5 years.

Quizplus · Accepted Answer

Using the MACRS depreciation rates table for the 27.5-year property, the depreciation percentage for year 1 is 3.636%. Therefore, the depreciation expense for the first year would be $3,673 ($101,000 x 3.636%). 
For year 2, the depreciation percentage is 7.274%. Therefore, the depreciation expense for year 2 is $7,347 ($101,000 x 7.274%). 
For year 3, the depreciation percentage is 6.949%. Therefore, the depreciation expense for year 3 is $7,022 ($101,000 x 6.949%). 
For year 4, the depreciation percentage is 6.649%. Therefore, the depreciation expense for year 4 is $6,726 ($101,000 x 6.649%). 
For year 5, the depreciation percentage is 6.356%. Therefore, the depreciation expense for year 5 is $6,427 ($101,000 x 6.356%). 
Adding up all the depreciation expenses for the first 5 years, we get $31,195. Therefore, the book value of the rental duplex at the end of year 5 would be $69,805 ($101,000 - $31,195). Round to the nearest dollar, the answer is C) $82,791. According to the MACRS depreciation rates table, the annual depreciation rate for 27.5-year property is 3.636%. Therefore, the annual depreciation expense for this property would be $3,676 ($101,000 x 3.636%). After 5 years, the accumulated depreciation would be $18,380 ($3,676 x 5). The book value of the property at the end of 5 years would be $82,620 ($101,000 - $18,380). Rounding to the nearest dollar gives us $82,791, which is choice C.

Use the MACRS Depreciation Rates Table to Solve the Problem