Using the MACRS rates from the following table, what is the book value of a $3,000 computer after 5 years? Year MACRS Rate 1 20.0 % 2 32.0 % 3 19.2% 4 11.52% 5 11.52 % book value = [?]
Using the MACRS rates from the following table, what is the book value of a $3,000 computer after 5 years? Year MACRS Rate 1 20.0 % 2 32.0 % 3 19.2% 4 11.52% 5 11.52 % book value = [?]
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Book value of a $3000 computer after 5 years
Transcribed Image Text:**Using MACRS Rates to Determine the Book Value of a Computer**
### Question:
Using the MACRS (Modified Accelerated Cost Recovery System) rates from the following table, what is the book value of a $3,000 computer after 5 years?
### MACRS Depreciation Rates:
| Year | MACRS Rate |
|------|------------|
| 1 | 20.0% |
| 2 | 32.0% |
| 3 | 19.2% |
| 4 | 11.52% |
| 5 | 11.52% |
### Calculation:
To calculate the book value, we subtract the accumulated depreciation from the initial purchase price of the computer. The depreciation for each year is calculated using the given MACRS rates.
**Year 1**:
Depreciation = $3,000 * 20.0% = $600
Remaining value = $3,000 - $600 = $2,400
**Year 2**:
Depreciation = $3,000 * 32.0% = $960
Remaining value = $2,400 - $960 = $1,440
**Year 3**:
Depreciation = $3,000 * 19.2% = $576
Remaining value = $1,440 - $576 = $864
**Year 4**:
Depreciation = $3,000 * 11.52% = $345.60
Remaining value = $864 - $345.60 = $518.40
**Year 5**:
Depreciation = $3,000 * 11.52% = $345.60
Remaining value = $518.40 - $345.60 = $172.80
**Book Value** = $172.80 (rounded to the nearest hundredth)
### User Interaction:
Please enter this calculated book value into the field provided and round to the nearest hundredth if necessary.
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This format ensures clarity and provides step-by-step guidance on how to solve the problem using the given MACRS rates.
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