Case Study 11.7
Given:
Initial Cost, P = $50,000 Salvage Value at the end of 5 years, S = $10,000.
Depreciable Life, N= 5 Years
$$\begin{array} { | l | l | l | }
\hline \text { Year } & \begin{array} { l }
\text { Projected } \
\text { Production, units }
\end{array} & \begin{array} { l }
\text { Actual } \
\text { Production, units }
\end{array} \
\hline 1 & 4,500 & 5,000 \
\hline 2 & 5,000 & 4,000 \
\hline 3 & 3,500 & 3,000 \
\hline 4 & 5,500 & 5,000 \
\hline 5 & 6,500 & \text { Not krown } \
\hline \text { Total } & \mathbf { 2 5 , 0 0 0 } & \
\hline
\end{array}$$
-If the equipment in problem 11.7 is sold at the end of year 4 for $30,000, what is the depreciation recapture on this equipment?

Question

Case Study 11.7
Given:
Initial Cost, P = $50,000 Salvage Value at the end of 5 years, S = $10,000.
Depreciable Life, N= 5 Years
 $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Projected } \
\text { Production, units }
\end{array} & \begin{array} { l } 
\text { Actual } \
\text { Production, units }
\end{array} \
\hline 1 & 4,500 & 5,000 \
\hline 2 & 5,000 & 4,000 \
\hline 3 & 3,500 & 3,000 \
\hline 4 & 5,500 & 5,000 \
\hline 5 & 6,500 & \text { Not krown } \
\hline \text { Total } & \mathbf { 2 5 , 0 0 0 } & \
\hline
\end{array}$$
-If the equipment in problem 11.7 is sold at the end of year 4 for $30,000, what is the depreciation recapture on this equipment?

Quizplus · Accepted Answer

The book value at the end of year 4 is calculated using straight-line depreciation: ($50,000 - $10,000) / 5 * 4 = $32,000. The equipment is sold for $30,000, so the depreciation recapture is $32,000 - $30,000 = $2,000. However, the correct choice is $7,200, which suggests a different calculation or error in the problem setup.

Case Study 11 -If the Equipment in Problem 11