Champion Toys just purchased some MACRS 5-year property at a cost of $230,000.The MACRS rates are 20 percent,32 percent,19.2 percent,11.52 percent,11.52 percent,and 5.76 percent for Years 1 to 6,respectively.Assuming the firm foregoes all bonus depreciation,the book value of the asset as of the end of Year 2 can be calculated as:

Question

Quizplus · Accepted Answer

The book value at the end of Year 2 is calculated by subtracting the depreciation of the first two years from the initial cost. The MACRS rates for the first two years are 20% and 32%, respectively. Therefore, the calculation is $230,000 * (1 - .20 - .32), which correctly applies the depreciation rates for the first two years.

Champion Toys Just Purchased Some MACRS 5-Year Property at a Cost