Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar.
-Respiratory Care, Inc. purchased new packaging equipment (5-year property)at a cost of $8,150.
Find the book value at the end of 4 years.

Question

Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar. 
-Respiratory Care, Inc. purchased new packaging equipment (5-year property)at a cost of $8,150.
Find the book value at the end of 4 years.

Quizplus · Accepted Answer

The book value at the end of 4 years can be calculated using the MACRS (Modified Accelerated Cost Recovery System) depreciation method, which is commonly used for tax purposes in the United States. For 5-year property, the MACRS depreciation rates are as follows: 1st year - 20%, 2nd year - 32%, 3rd year - 19.2%, 4th year - 11.52%, 5th year - 11.52%, and 6th year - 5.76%. To find the book value at the end of 4 years, we calculate the total depreciation over the first 4 years and subtract it from the original cost.Year 1 depreciation: $8,150 * 20% = $1,630Year 2 depreciation: $8,150 * 32% = $2,608Year 3 depreciation: $8,150 * 19.2% = $1,564.80Year 4 depreciation: $8,150 * 11.52% = $938.88Total depreciation over 4 years = $1,630 + $2,608 + $1,564.80 + $938.88 = $6,741.68Book value at the end of 4 years = Original cost - Total depreciation = $8,150 - $6,741.68 = $1,408.32Since the options are rounded to whole numbers, the closest option to $1,408.32 is $1,408.

Use the MACRS Depreciation Rates Table to Solve the Problem