Using the mAcrs rates what is book value of $2500 computer after 1 year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Using the mAcrs rates what is book value of $2500 computer after 1 year
![**Depreciation Calculation Using MACRS Rates**
**Problem Statement:**
Using the MACRS rates from the following table, what is the book value of a $2,500 computer after 1 year?
**MACRS Depreciation Table:**
| Year | MACRS Rate |
|------|-------------|
| 1 | 20.0% |
| 2 | 32.0% |
| 3 | 19.2% |
| 4 | 11.5% |
| 5 | 11.5% |
**Solution:**
To find the book value of the computer after 1 year, calculate the depreciated value using the MACRS rate for the 1st year.
**Formula:**
Book Value After 1 Year = (Initial Cost) * (1 - MACRS Rate for Year 1)
1. Initial Cost of Computer = $2,500
2. MACRS Rate for Year 1 = 20.0% = 0.20
\[ \text{Book Value After 1 Year} = \$2,500 \times (1 - 0.20) \]
\[ \text{Book Value After 1 Year} = \$2,500 \times 0.80 \]
\[ \text{Book Value After 1 Year} = \$2,000 \]
Therefore, the book value of the computer after 1 year is $2,000.
Please round to the nearest hundredth if necessary.
\*\*\*
This educational module on depreciation helps students understand how to apply MACRS (Modified Accelerated Cost Recovery System) rates to calculate the book value of assets over time. It is crucial for accounting and finance studies.
---
**Note:** Ensure to check each step when performing your own calculations for accuracy.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F575446a0-186f-4b70-aa51-18674b8a41c2%2Fa1377dce-3888-4ed2-95ea-be0e79e8755b%2Fe1xarev7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Depreciation Calculation Using MACRS Rates**
**Problem Statement:**
Using the MACRS rates from the following table, what is the book value of a $2,500 computer after 1 year?
**MACRS Depreciation Table:**
| Year | MACRS Rate |
|------|-------------|
| 1 | 20.0% |
| 2 | 32.0% |
| 3 | 19.2% |
| 4 | 11.5% |
| 5 | 11.5% |
**Solution:**
To find the book value of the computer after 1 year, calculate the depreciated value using the MACRS rate for the 1st year.
**Formula:**
Book Value After 1 Year = (Initial Cost) * (1 - MACRS Rate for Year 1)
1. Initial Cost of Computer = $2,500
2. MACRS Rate for Year 1 = 20.0% = 0.20
\[ \text{Book Value After 1 Year} = \$2,500 \times (1 - 0.20) \]
\[ \text{Book Value After 1 Year} = \$2,500 \times 0.80 \]
\[ \text{Book Value After 1 Year} = \$2,000 \]
Therefore, the book value of the computer after 1 year is $2,000.
Please round to the nearest hundredth if necessary.
\*\*\*
This educational module on depreciation helps students understand how to apply MACRS (Modified Accelerated Cost Recovery System) rates to calculate the book value of assets over time. It is crucial for accounting and finance studies.
---
**Note:** Ensure to check each step when performing your own calculations for accuracy.
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