Exhibit 11-05 Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, 2013.
-Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 5?

Question

Exhibit 11-05 Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, 2013.   
-Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 5?

Quizplus · Accepted Answer

In year 5, the asset will be in the fourth year of its MACRS recovery period (7-year recovery period). The percentage for year 4 is 11.52%. Therefore, the depreciation for year 5 would be $12,096 ($105,840 x 11.52%). Option A is incorrect because $6,048 represents the depreciation for year 2. Option B is incorrect because $15,000 is the total depreciation for year 1. Option D is incorrect because depreciation is still recorded in year 5, as the asset has not completed its entire recovery period.

Exhibit 11-05 Wilson Is Preparing His Tax Returns Using the MACRS