CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 10, Problem 3PROB
Summary Introduction
Cost of asset includes all the cost which incurs for acquiring the machine. Cost includes shipping and installation cost.
MACRS stands for modified accelerated cost recovery system. Life of the asset will be classified as per the internal revenue code.
Three years MACRS rates, Year 1: 33.33%, Year 2: 44.45%, Year 3: 14.81% and Year 4: 7.41%.
US purchased a new machine $350,000, shipping cost $20,000 and installation cost is $50,000. Asset is classified as three years MACRS class.
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