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If corporate headquarters for UPS in Atlanta is considering adding to its 96,000 + fleet of delivery vans, what is year 5’s depreciation expense using MACRS if one van costs $78,500? (Table 17.4 and Table 17.5)

If corporate headquarters for UPS in Atlanta is considering adding to its 96,000 + fleet of delivery vans, what is year 5’s depreciation expense using MACRS if one van costs $78,500? (Table 17.4 and Table 17.5)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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If corporate headquarters for UPS in Atlanta is considering adding to its 96,000 + fleet of delivery vans, what is year 5’s depreciation expense using MACRS if one van costs $78,500? (Table 17.4 and Table 17.5)  (Round your answer to the nearest cent.)

******TABLES ATTACHED*******************

 

**TABLE 17-4** **Modified Accelerated Cost Recovery System (MACRS) for assets placed in service after December 31, 1986** | Class recovery period (life) | Asset types | |------------------------------|-------------| | 3-year* | Racehorses more than 2 years old or any horse other than a racehorse that is more than 12 years old at the time placed into service; special tools of certain industries. | | 5-year* | Automobiles (not luxury); taxis; light general-purpose trucks; semiconductor manufacturing equipment; computer-based telephone central-office switching equipment; qualified technological equipment; property used in connection with research and experimentation. | | 7-year* | Railroad track; single-purpose agricultural (pigpens) or horticultural structures; fixtures; equipment; furniture. | | 10-year† | New law doesn’t add any specific property under this class. | | 15-year† | Municipal wastewater treatment plants; telephone distribution plants and comparable equipment used for two-way exchange of voice and data communications. | | 20-year† | Municipal sewers. | | 27.5-year‡ | Only residential rental property. | | 31.5-year‡ | Only nonresidential real property. | *These classes use a 200% declining-balance method switching to the straight-line method. †These classes use a 150% declining-balance method switching to the straight-line method. ‡These classes use a straight-line method.
Transcribed Image Text:**TABLE 17-4** **Modified Accelerated Cost Recovery System (MACRS) for assets placed in service after December 31, 1986** | Class recovery period (life) | Asset types | |------------------------------|-------------| | 3-year* | Racehorses more than 2 years old or any horse other than a racehorse that is more than 12 years old at the time placed into service; special tools of certain industries. | | 5-year* | Automobiles (not luxury); taxis; light general-purpose trucks; semiconductor manufacturing equipment; computer-based telephone central-office switching equipment; qualified technological equipment; property used in connection with research and experimentation. | | 7-year* | Railroad track; single-purpose agricultural (pigpens) or horticultural structures; fixtures; equipment; furniture. | | 10-year† | New law doesn’t add any specific property under this class. | | 15-year† | Municipal wastewater treatment plants; telephone distribution plants and comparable equipment used for two-way exchange of voice and data communications. | | 20-year† | Municipal sewers. | | 27.5-year‡ | Only residential rental property. | | 31.5-year‡ | Only nonresidential real property. | *These classes use a 200% declining-balance method switching to the straight-line method. †These classes use a 150% declining-balance method switching to the straight-line method. ‡These classes use a straight-line method.
**Table 17-5: Annual Recovery for MACRS** This table displays the Modified Accelerated Cost Recovery System (MACRS) percentages for different classes of asset recovery periods. The table is used to determine the depreciation for assets based on recovery years and specific classes. The percentage values indicate the portion of the asset's cost that is recoverable each year under MACRS. **Columns:** 1. **Recovery Year:** Indicates the year of the recovery period. 2. **3-year class (200% D.B.):** Depreciation percentages for assets with a 3-year recovery period using the 200% declining balance method. 3. **5-year class (200% D.B.):** Depreciation percentages for assets with a 5-year recovery period using the 200% declining balance method. 4. **7-year class (200% D.B.):** Depreciation percentages for assets with a 7-year recovery period using the 200% declining balance method. 5. **10-year class (200% D.B.):** Depreciation percentages for assets with a 10-year recovery period using the 200% declining balance method. 6. **15-year class (150% D.B.):** Depreciation percentages for assets with a 15-year recovery period using the 150% declining balance method. 7. **20-year class (150% D.B.):** Depreciation percentages for assets with a 20-year recovery period using the 150% declining balance method. **Notes on Values:** - Percentages followed by an asterisk (*) indicate the year the switch is made to the straight-line depreciation method. **Percentage Values by Recovery Year:** 1. **Year 1:** - 3-year: 33.00% - 5-year: 20.00% - 7-year: 14.28% - 10-year: 10.00% - 15-year: 5.00% - 20-year: 3.75% 2. **Year 2:** - 3-year: 45.00% - 5-year: 32.00% - 7-year: 24.49% - 10-year: 18.00% - 15-year: 9.50% - 20-year: 7.22% 3. **Year 3:** - 3
Transcribed Image Text:**Table 17-5: Annual Recovery for MACRS** This table displays the Modified Accelerated Cost Recovery System (MACRS) percentages for different classes of asset recovery periods. The table is used to determine the depreciation for assets based on recovery years and specific classes. The percentage values indicate the portion of the asset's cost that is recoverable each year under MACRS. **Columns:** 1. **Recovery Year:** Indicates the year of the recovery period. 2. **3-year class (200% D.B.):** Depreciation percentages for assets with a 3-year recovery period using the 200% declining balance method. 3. **5-year class (200% D.B.):** Depreciation percentages for assets with a 5-year recovery period using the 200% declining balance method. 4. **7-year class (200% D.B.):** Depreciation percentages for assets with a 7-year recovery period using the 200% declining balance method. 5. **10-year class (200% D.B.):** Depreciation percentages for assets with a 10-year recovery period using the 200% declining balance method. 6. **15-year class (150% D.B.):** Depreciation percentages for assets with a 15-year recovery period using the 150% declining balance method. 7. **20-year class (150% D.B.):** Depreciation percentages for assets with a 20-year recovery period using the 150% declining balance method. **Notes on Values:** - Percentages followed by an asterisk (*) indicate the year the switch is made to the straight-line depreciation method. **Percentage Values by Recovery Year:** 1. **Year 1:** - 3-year: 33.00% - 5-year: 20.00% - 7-year: 14.28% - 10-year: 10.00% - 15-year: 5.00% - 20-year: 3.75% 2. **Year 2:** - 3-year: 45.00% - 5-year: 32.00% - 7-year: 24.49% - 10-year: 18.00% - 15-year: 9.50% - 20-year: 7.22% 3. **Year 3:** - 3
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