[The following information applies to the questions displayed below.] Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.) Date Placed Original Asset in Service Basis Machinery October 25 $ 72,000 Computer equipment February 3 11,500 Used delivery truck* August 17 24,500 Furniture April 22 152,500 *The delivery truck is not a luxury automobile. a. What is the allowable MACRS depreciation on Evergreen’s property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.) Table 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% Year 2 44.45 32.00 24.49 18.00 9.50 7.219 Year 3 14.81 19.20 17.49 14.40 8.55 6.677 Year 4 7.41 11.52 12.49 11.52 7.70 6.177 Year 5 11.52 8.93 9.22 6.93 5.713 Year 6 5.76 8.92 7.37 6.23 5.285 Year 7 8.93 6.55 5.90 4.888 Year 8 4.46 6.55 5.90 4.522 Year 9 6.56 5.91 4.462 Year 10 6.55 5.90 4.461 Year 11 3.28 5.91 4.462 Year 12 5.90 4.461 Year 13 5.91 4.462 Year 14 5.90 4.461 Year 15 5.91 4.462 Year 16 2.95 4.461 Year 17 4.462 Year 18 4.461 Year 19 4.462 Year 20 4.461 Year 21 2.231 TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 35.00% 25.00% Year 2 26.00 21.43 Year 3 15.60 15.31 Year 4 11.01 10.93 Year 5 11.01 8.75 Year 6 1.38 8.74 Year 7 8.75 Year 8 1.09 TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 25.00% 17.85% Year 2 30.00 23.47 Year 3 18.00 16.76 Year 4 11.37 11.97 Year 5 11.37 8.87 Year 6 4.26 8.87 Year 7 8.87 Year 8 3.34 TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 15.00% 10.71% Year 2 34.00 25.51 Year 3 20.40 18.22 Year 4 12.24 13.02 Year 5 11.30 9.30 Year 6 7.06 8.85 Year 7 8.86 Year 8 5.53 TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 5.00% 3.57% Year 2 38.00 27.55 Year 3 22.80 19.68 Year 4 13.68 14.06 Year 5 10.94 10.04 Year 6 9.58 8.73 Year 7 8.73 Year 8 7.64
[The following information applies to the questions displayed below.] Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.) Date Placed Original Asset in Service Basis Machinery October 25 $ 72,000 Computer equipment February 3 11,500 Used delivery truck* August 17 24,500 Furniture April 22 152,500 *The delivery truck is not a luxury automobile. a. What is the allowable MACRS depreciation on Evergreen’s property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.) Table 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% Year 2 44.45 32.00 24.49 18.00 9.50 7.219 Year 3 14.81 19.20 17.49 14.40 8.55 6.677 Year 4 7.41 11.52 12.49 11.52 7.70 6.177 Year 5 11.52 8.93 9.22 6.93 5.713 Year 6 5.76 8.92 7.37 6.23 5.285 Year 7 8.93 6.55 5.90 4.888 Year 8 4.46 6.55 5.90 4.522 Year 9 6.56 5.91 4.462 Year 10 6.55 5.90 4.461 Year 11 3.28 5.91 4.462 Year 12 5.90 4.461 Year 13 5.91 4.462 Year 14 5.90 4.461 Year 15 5.91 4.462 Year 16 2.95 4.461 Year 17 4.462 Year 18 4.461 Year 19 4.462 Year 20 4.461 Year 21 2.231 TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 35.00% 25.00% Year 2 26.00 21.43 Year 3 15.60 15.31 Year 4 11.01 10.93 Year 5 11.01 8.75 Year 6 1.38 8.74 Year 7 8.75 Year 8 1.09 TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 25.00% 17.85% Year 2 30.00 23.47 Year 3 18.00 16.76 Year 4 11.37 11.97 Year 5 11.37 8.87 Year 6 4.26 8.87 Year 7 8.87 Year 8 3.34 TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 15.00% 10.71% Year 2 34.00 25.51 Year 3 20.40 18.22 Year 4 12.24 13.02 Year 5 11.30 9.30 Year 6 7.06 8.85 Year 7 8.86 Year 8 5.53 TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 5.00% 3.57% Year 2 38.00 27.55 Year 3 22.80 19.68 Year 4 13.68 14.06 Year 5 10.94 10.04 Year 6 9.58 8.73 Year 7 8.73 Year 8 7.64
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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[The following information applies to the questions displayed below.]
Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus
| Date Placed | Original | ||
| Asset | in Service | Basis | |
| Machinery | October 25 | $ | 72,000 |
| Computer equipment | February 3 | 11,500 | |
| Used delivery truck* | August 17 | 24,500 | |
| Furniture | April 22 | 152,500 | |
|
|
*The delivery truck is not a luxury automobile.
a. What is the allowable MACRS depreciation on Evergreen’s property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)
Table 1 MACRS Half-Year Convention
| Depreciation Rate for Recovery Period | ||||||
|---|---|---|---|---|---|---|
| 3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year | |
| Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
| Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
| Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
| Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
| Year 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
| Year 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
| Year 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
| Year 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
| Year 9 | 6.56 | 5.91 | 4.462 | |||
| Year 10 | 6.55 | 5.90 | 4.461 | |||
| Year 11 | 3.28 | 5.91 | 4.462 | |||
| Year 12 | 5.90 | 4.461 | ||||
| Year 13 | 5.91 | 4.462 | ||||
| Year 14 | 5.90 | 4.461 | ||||
| Year 15 | 5.91 | 4.462 | ||||
| Year 16 | 2.95 | 4.461 | ||||
| Year 17 | 4.462 | |||||
| Year 18 | 4.461 | |||||
| Year 19 | 4.462 | |||||
| Year 20 | 4.461 | |||||
| Year 21 | 2.231 |
TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 35.00% | 25.00% |
| Year 2 | 26.00 | 21.43 |
| Year 3 | 15.60 | 15.31 |
| Year 4 | 11.01 | 10.93 |
| Year 5 | 11.01 | 8.75 |
| Year 6 | 1.38 | 8.74 |
| Year 7 | 8.75 | |
| Year 8 | 1.09 |
TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 25.00% | 17.85% |
| Year 2 | 30.00 | 23.47 |
| Year 3 | 18.00 | 16.76 |
| Year 4 | 11.37 | 11.97 |
| Year 5 | 11.37 | 8.87 |
| Year 6 | 4.26 | 8.87 |
| Year 7 | 8.87 | |
| Year 8 | 3.34 |
TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 15.00% | 10.71% |
| Year 2 | 34.00 | 25.51 |
| Year 3 | 20.40 | 18.22 |
| Year 4 | 12.24 | 13.02 |
| Year 5 | 11.30 | 9.30 |
| Year 6 | 7.06 | 8.85 |
| Year 7 | 8.86 | |
| Year 8 | 5.53 |
TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 5.00% | 3.57% |
| Year 2 | 38.00 | 27.55 |
| Year 3 | 22.80 | 19.68 |
| Year 4 | 13.68 | 14.06 |
| Year 5 | 10.94 | 10.04 |
| Year 6 | 9.58 | 8.73 |
| Year 7 | 8.73 | |
| Year 8 | 7.64 |
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