A firm is considering purchasing an asset that will cost $5 million. Other depreciable costs include $800,000 in installation costs. If the asset is classified in the 5-year class, what is the annual depreciation for years 1, 3, and 6 for this asset, using the fixed depreciation percentages given by MACRS? (The percentages are 20.00%, 19.20%, 5.76%, and 8.93%, respectively.)
A) $1,856,000, $1,113,600, and $334,080 for years 1, 3, and 6, respectively
B) $1,160,000, $1,113,600, and $334,080 for years 1, 3, and 6, respectively
C) $1,160,000, $1,113,600, and $668,160 for years 1, 3, and 6, respectively
D) $5,800,000, $1,160,000, and $1,113,600 for years 1, 3, and 6, respectively

Question

Quizplus · Accepted Answer

The total depreciable cost is $5,800,000 ($5 million + $800,000). Using MACRS percentages: Year 1: 20% of $5,800,000 = $1,160,000; Year 3: 19.20% of $5,800,000 = $1,113,600; Year 6: 5.76% of $5,800,000 = $334,080.

A Firm Is Considering Purchasing an Asset That Will Cost