Classic Cars is considering a project that requires $311,250 of fixed assets that are classified as five-year property for ACRS.What is the book value of these assets at the end of Year 3? The MACRS allowance percentages are as follows,commencing with Year 1:20.00,32.00,19.20,11.52,11.52,and 5.76 percent.

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Quizplus · Accepted Answer

Since the assets are classified as five-year property for ACRS, we can apply the MACRS allowance percentages for the first 5 years. Therefore, for Year 1, the depreciation expense would be $62,250 (20% x $311,250), for Year 2 it would be $99,600 (32% x ($311,250-$62,250)), for Year 3 it would be $59,904 (19.2% x ($311,250-$62,250-$99,600)). The book value of the assets at the end of Year 3 would then be $311,250 - $62,250 - $99,600 - $59,904 = $89,640. Therefore, the correct answer is C.

Classic Cars Is Considering a Project That Requires $311,250 of Fixed