Question

Use Excel and show formulas please You are getting paid lots of money to determine the best depreciation method for a piece of equipment that costs $50,000 and has a zero salvage value at the end of a 10-year depreciable life. Compute the depreciation schedules for each of the following methods:

a) straight line depreciation

b) double declining balance depreciation (DDB)

c) 100% bonus depreciation

d) MACRS

Answer 1

a. Straight line = 50,000/10 = 5000 per year for 10 years

b. Double declining = 1/useful life * 2 = 1/10 * 2 = 20%

Year	Cost	Depreciation rate	Depreciation	Accumulated depreciation	Book Value
1	$ 50,000.00	20%	$    10,000.00	$                                10,000.00	$ 40,000.00
2	$ 40,000.00	20%	$      8,000.00	$                                18,000.00	$ 32,000.00
3	$ 32,000.00	20%	$      6,400.00	$                                24,400.00	$ 25,600.00
4	$ 25,600.00	20%	$      5,120.00	$                                29,520.00	$ 20,480.00
5	$ 20,480.00	20%	$      4,096.00	$                                33,616.00	$ 16,384.00
6	$ 16,384.00	20%	$      3,276.80	$                                36,892.80	$ 13,107.20
7	$ 13,107.20	20%	$      2,621.44	$                                39,514.24	$ 10,485.76
8	$ 10,485.76	20%	$      2,097.15	$                                41,611.39	$   8,388.61
9	$   8,388.61	20%	$      1,677.72	$                                43,289.11	$   6,710.89
10	$   6,710.89	20%	$      1,342.18	$                                44,631.29	$   5,368.71

d) Modified Accelerated Cost recovery system-

Percentages for MACRS depreciation taken from the 7-year class personal property table-

Year		MACRS
1	14.29% ($50,000)	=$7,145
2	24.49%($50,000)	=$12,245
3	17.49%($50,000)	=$8,745
4	12.49%($50,000)	=$6,245
5	8.93%($50,000)	=$4,465
6	8.92%($50,000)	=$4,460
7	8.93%($50,000)	=$4,465
8	4.46%($50,000)	=$2,230
9.		0