A firm is considering purchasing an asset that will cost $1 million.Other depreciable costs include $100,000 in installation costs.If the asset is classified in the 3-year class,what is the annual depreciation for each year for this asset using the fixed depreciation percentages given by MACRS? (The percentages are 33.33%,44.45%,14.81%,and 7.41%,respectively.)
A)$366,667,$366,667,$366,667 and $0 for years 1,2,3,and 4,respectively
B)$275,000,$275,000,$275,000,and $275,000 for years 1,2,3,and 4,respectively
C)$366,630,$488,950,$162,910,and $81,510 for years 1,2,3,and 4,respectively
D)$366,630,$488,950,$81,510,and $81,510 for years 1,2,3,and 4,respectively

Question

Quizplus · Accepted Answer

According to MACRS, the asset will be depreciated over 4 years as follows:
Year 1: 33.33% of $1,100,000 = $366,630
Year 2: 44.45% of $1,100,000 = $488,950
Year 3: 14.81% of $1,100,000 = $162,910
Year 4: 7.41% of $1,100,000 = $81,510
Therefore, the annual depreciation for each year is $366,630, $488,950, $162,910, and $81,510 for years 1, 2, 3, and 4, respectively. Option C is the correct answer.

A Firm Is Considering Purchasing an Asset That Will Cost