Consider a five-year MACRS asset purchasedat $80,000. (Note that a five-year MACRS propertyclass is depreciated over six years due to the half-yearconvention. The applicable salvage values would be$40,000 in year 3, $30,000 in year 5, and $10,000 inyear 6.) Compute the gain or loss amounts when theasset is disposed of in(a) Year 3.(b) Year 5.(c) Year 6
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Consider a five-year MACRS asset purchased
at $80,000. (Note that a five-year MACRS property
class is
convention. The applicable salvage values would be
$40,000 in year 3, $30,000 in year 5, and $10,000 in
year 6.) Compute the gain or loss amounts when the
asset is disposed of in
(a) Year 3.
(b) Year 5.
(c) Year 6
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