RP&A,Inc. purchased some fixed assets four years ago at a cost of $19,800. It no longer needs these assets so is going to sell them today at a price of $3,500. The assets are classified as 5-year property for MACRS. What is the current book value of these assets?

Question

Quizplus · Accepted Answer

Using MACRS depreciation, the assets would have been depreciated over 5 years, meaning that each year the assets would be depreciated by 20% of the original cost, or $3,960. After four years, the accumulated depreciation would be $15,840. The current book value of the assets would be the original cost of $19,800 minus the accumulated depreciation of $15,840, which equals $3,960. Since the assets are being sold for $3,500, the book value is higher than the sale price, indicating a loss on the sale. Therefore, the current book value of these assets is $3,960 - $460 (loss on sale) = $3,500, which is option B.

RP&A,Inc Purchased Some Fixed Assets Four Years Ago at a Cost