College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
22nd Edition
ISBN: 9781305666160
Author: James A. Heintz, Robert W. Parry
Publisher: Cengage Learning
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Chapter 5A, Problem 4SEB
MODIFIED ACCELERATED COST RECOVERY SYSTEM Using the information given in Exercise 5Apx-1B and the rates shown in Figure 5A-4, prepare a
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Modified Accelerated Cost Recovery System
An example of a depreciation schedule under the Modified Accelerated Cost Recovery System of depreciation is shown. The Internal Revenue Service (IRS) classifies various assets according to useful life and sets depreciation rates for each year of the asset’s life. This asset has a five year life. The MACRS rates are shown in the schedule. This example is for an asset with a cost of $40,000 and a salvage value of $4,000.
MODIFIED ACCELERATED COST RECOVERY SYSTEM
Year
Cost
×
Rate
=
DepreciationExpense
AccumulatedDepreciation(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…
Modified Accelerated Cost Recovery System
An example of a depreciation schedule under the Modified Accelerated Cost Recovery System of depreciation is shown. The Internal Revenue Service (IRS) classifies various assets according to useful life and sets depreciation rates for each year of the asset’s life. This asset has a five year life. The MACRS rates are shown in the schedule. This example is for an asset with a cost of $40,000 and a salvage value of $4,000.
MODIFIED ACCELERATED COST RECOVERY SYSTEM
Year
Cost
×
Rate
=
DepreciationExpense
AccumulatedDepreciation(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…
Modified Accelerated Cost Recovery System
An example of a depreciation schedule under the Modified Accelerated Cost Recovery System of depreciation is shown. The Internal Revenue Service (IRS) classifies various assets according to useful life and sets depreciation rates for each year of the asset’s life. This asset has a five year life. The MACRS rates are shown in the schedule. This example is for an asset with a cost of $40,000 and a salvage value of $4,000.
MODIFIED ACCELERATED COST RECOVERY SYSTEM
Year
Cost
×
Rate
=
Depreciation Expense
AccumulatedDepreciation(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…
Chapter 5A Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Ch. 5A - List three depreciation methods used for financial...Ch. 5A - Which depreciation method is used for tax...Ch. 5A - STRAIGHT-LINE DEPRECIATION A small deliver truck...Ch. 5A - SUM-OF-THE-YEARS'-DIGITS DEPRECIATION Using the...Ch. 5A - Prob. 3SEACh. 5A - MODIFIED ACCELERATED COST RECOVERY SYSTEM Using...Ch. 5A - STRAIGHT-LINE DEPRECIATION A computer was...Ch. 5A - Prob. 2SEBCh. 5A - DOUBLE-DECLININGBALANCE DEPRECIATION Using the...Ch. 5A - MODIFIED ACCELERATED COST RECOVERY SYSTEM Using...
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- An asset costs $260,000 and is classified as a ten-year asset. What is the annual depreciation expense for the first three years under the straight-line and the modified accelerated cost recovery systems of depreciation? Be sure to apply the half-year convention to straight-line depreciation. Use Exhibit 9.4 to answer the question. Round your answers to the nearest dollar. Straight-line depreciation: Year 1 2 3 Accelerated cost recovery system of depreciation: Year 1 2 Depreciation expense $ 3 Depreciation expense $ AAarrow_forwardUsing MACRS, what is the depreciation for the first year on furniture costing $12,000? (Use Table 17.4 and Table 17.5.) (Round your answer to the nearest cent.) *******TABLES ATTACHED************ Depreciation for the first yeararrow_forwardI have included the question and answer I just need to know how to get the answer. Chart attached. Find the depreciation for the indicated year using MACRS cost-recovery rates for the properties placed in service at midyear. Round dollar amounts to the nearest cent. Property Class: 3-year Depreciation year: 3 Cost of property: $97,700 $14,469.37 - answerarrow_forward
- An asset costs $290,000 and is classified as a ten-year asset. What is the annual depreciation expense for the first three years under the straight-line and the modified accelerated cost recovery systems of depreciation? Be sure to apply the half-year convention to straight-line depreciation. Use Exhibit 9.4 to answer the question. Round your answers to the nearest dollar. Straight-line depreciation: Year Depreciation expense 1 $ 2 $ 3 $ Accelerated cost recovery system of depreciation: Year Depreciation expense 1 $ 2 $ 3 $arrow_forwardAccelerated methods of depreciation result in greater depreciation allowances than straight-line depreciation in the early years of the depreciation schedule. Suppose a personal property is eligible for a three-year cost recovery period and can be depreciated using 200 percent declining balance depreciation. Calculate the accelerated depreciation rate in the first year. A) 28.57% B) 33.33% C) 14.28% D) 66.66%arrow_forwardProvide step by step manual solution, given, and depreciation table for below mentioned problem. Make sure yet that your answer is the same as the given answer before sending your solution. An asset costing P50,000 has a life expectancy of 6 years and an estimated salvage value of P8,000. Calculate the depreciation charge at the end of the fourth period using fixed-percentage method. Answer. P5,263.87arrow_forward
- An asset with a first cost of $7,000 is depreciated using the Modified Accelerated Cost recovery System (MACRS) over a 5-year period. The cash flow before taxes (CFBT) is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and the money is worth 8% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?arrow_forwardI need help with this solutionarrow_forwardUse the information in Problem A-1 to solve this problem. Assume that the van is five-year property for tax purposes. Required Prepare a schedule of depreciation under MACRS. Round figures to the nearest whole dollar. PROBLEM A-1 A delivery van was bought for 18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be 2,000. Check Figure Year 3 depreciation, 3,456arrow_forward
- A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Year 1 $3,300 Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 2 $8,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income Depreciation 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0arrow_forwardPlease tell what is the use of recovery time in this question why it is given where it will be used why recovery value of 7 is given how is it used in question.arrow_forwardA machine can be purchased for $60,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied using a five-year life and a zero salvage value. Year 1 Year 2 Year 3 Year 4 Year 5 Net income $3,900 $9,900 $32,000 $14,700 $39,600 Compute the machine's payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.) Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow (60,000) $ (60,000) 1 $ 3,900 2 9,900 3 32,000 4 14,700 5 39,600 Payback periodarrow_forward
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