Year Cost × Rate = Depreciation Expense Accumulated Depreciation (End of Year) Book Value (End of Year) 1 $40,000 20.00% $8,000 $8,000 $32,000 2 40,000 32.00% 12,800 20,800 19,200 3 40,000 19.20% 7,680 28,480 11,520 4 40,000 11.52% 4,608 33,088 6,912 5 40,000 11.52% 4,608 37,696 2,304 6 40,000 5.76% 2,304 40,000 0 Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the Modified Accelerated Cost Recovery System for a small delivery truck purchased on January 1 at a cost of $30,000 and a salvage value of $6,000. For tax purposes, assume that the truck has a useful life of five years. Use the rates from the example provided. (The IRS schedule will spread depreciation over six years.)
Modified Accelerated Cost Recovery System
An example of a
| MODIFIED ACCELERATED COST RECOVERY SYSTEM | |||||||
|---|---|---|---|---|---|---|---|
Year |
Cost |
× |
Rate |
= |
Depreciation Expense |
Depreciation (End of Year) |
Book Value (End of Year) |
| 1 | $40,000 | 20.00% | $8,000 | $8,000 | $32,000 | ||
| 2 | 40,000 | 32.00% | 12,800 | 20,800 | 19,200 | ||
| 3 | 40,000 | 19.20% | 7,680 | 28,480 | 11,520 | ||
| 4 | 40,000 | 11.52% | 4,608 | 33,088 | 6,912 | ||
| 5 | 40,000 | 11.52% | 4,608 | 37,696 | 2,304 | ||
| 6 | 40,000 | 5.76% | 2,304 | 40,000 | 0 |
Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the Modified Accelerated Cost Recovery System for a small delivery truck purchased on January 1 at a cost of $30,000 and a salvage value of $6,000. For tax purposes, assume that the truck has a useful life of five years. Use the rates from the example provided. (The IRS schedule will spread depreciation over six years.)
Meaning of Modified Accelerated Cost Recovery System (MACRS)
The modified accelerated cost recovery system (MACRS) is a depreciation system used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of an asset to be recovered over a specified period via annual deductions. The MACRS system puts fixed assets into classes that have set depreciation periods.
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