The manager of a plant that manufactures stepper drives knows that MACRS and DDB are both accelerated depreciation methods, but out of curiosity, he wants to determine which one offers faster write-off in the first three years for equipment that has a first cost of $400,000, a 5-year life, and a $50,000 salvage value. Determine which method yields the lower book value and by how much. DDB provides faster write-off for 3 years and difference is $28,800 DDB provides faster write-off for 3 years and difference is $12,600 MACRS provides faster write-off for 3 years and difference is $28,800 MACRS provides faster write-off for 3 years and difference is $12,600

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The manager of a plant that manufactures stepper drives knows that MACRS and
DDB are both accelerated depreciation methods, but out of curiosity, he wants to
determine which one offers faster write-off in the first three years for equipment
that has a first cost of $400,000, a 5-year life, and a $50,000 salvage value.
Determine which method yields the lower book value and by how much.
DDB provides faster write-off for 3 years and difference is $28,800
DDB provides faster write-off for 3 years and difference is $12,600
MACRS provides faster write-off for 3 years and difference is $28,800
MACRS provides faster write-off for 3 years and difference is $12,600
Transcribed Image Text:The manager of a plant that manufactures stepper drives knows that MACRS and DDB are both accelerated depreciation methods, but out of curiosity, he wants to determine which one offers faster write-off in the first three years for equipment that has a first cost of $400,000, a 5-year life, and a $50,000 salvage value. Determine which method yields the lower book value and by how much. DDB provides faster write-off for 3 years and difference is $28,800 DDB provides faster write-off for 3 years and difference is $12,600 MACRS provides faster write-off for 3 years and difference is $28,800 MACRS provides faster write-off for 3 years and difference is $12,600
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