A firm purchases an asset falling into the 3-year MACRS category for $48,000. The second year's depreciation expense for this asset would be

Question

Quizplus · Accepted Answer

The depreciation expense for the 3-year MACRS category asset in the second year would be calculated using the double-declining balance method at a rate of 32%. 
Year 1: (1/3) x $48,000 = $16,000 depreciation expense
Year 2: (1/3) x ($48,000 - $16,000) x 32% = $5,120 + (1/3) x $16,000 x 32% = $5,120 + $1,706.67 = $6,826.67 depreciation expense. 
Therefore, the second year's depreciation expense would be $21,360 - $6,826.67 = $14,533.33. 
The correct choice is B.

A Firm Purchases an Asset Falling into the 3-Year MACRS