To keep track of customers' behavior, a grocery store chain invests $75,000 in a CRM system. This new system is treated as a seven-year MARCS property for tax purposes. The system's life-span is six years, and at the end of the six years, the expected salvage value is $5,500. (i) What is the depreciation allowance for the forth year of use? (ii) What is the depreciation allowance for the sixth year of use? A) (i) $9,367.5, (ii)$3,345.0 B) (i) $9,367.5, (ii)$6,690.0 C) (i) $8,680.6, (ii)$3,099.7 D) Answers A, B and C are not correct
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.
To keep track of customers' behavior, a grocery store chain invests $75,000 in a CRM system. This new system is treated as a seven-year MARCS property for tax purposes.
The system's life-span is six years, and at the end of the six years, the expected salvage value is $5,500.
(i) What is the
(ii) What is the depreciation allowance for the sixth year of use?
A) (i) $9,367.5, (ii)$3,345.0
B) (i) $9,367.5, (ii)$6,690.0
C) (i) $8,680.6, (ii)$3,099.7
D) Answers A, B and C are not correct
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