Question

A high-precision programmable router for shaping furniture components is purchased by Henredon for $99,100. It is expected to last 9years. Calculate the depreciation deduction and book value for each year using MACRS-GDS allowances.

Answer 1

As per the applicable rules, the router for shaping furniture components will be treated as a 7 Year MACRS property. The depreciation deduction and book value each year is calculated as below:

Year	Cost (A)	MACRS Depreciation Rate (B)	Annual Depreciation (A*B)	Book Value
1	$99,100.00	14.29%	$14,161.39	$84,938.61
2	$99,100.00	24.49%	$24,269.59	$60,669.02
3	$99,100.00	17.49%	$17,332.59	$43,336.43
4	$99,100.00	12.49%	$12,377.59	$30,958.84
5	$99,100.00	8.93%	$8,849.63	$22,109.21
6	$99,100.00	8.92%	$8,839.72	$13,269.49
7	$99,100.00	8.93%	$8,849.63	$4,419.86
8	$99,100.00	4.46%	$4,419.86	0.00

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Notes:

The book value for each year is determined as follows:

Book Value (Year 1) = Cost - Depreciation for Year 1 = 99,100 - 14,161.39 = $84,938.61

Book Value (Year 2) = Book Value (Year 1) - Depreciation for Year 2 = 84,938.61 - 24,269.59 = $60,669.02

Book Value (Year 3) = Book Value (Year 2) - Depreciation for Year 3 = 60,669.02 - 17,332.59 = $43,336.43

Book Value (Year 4) = Book Value (Year 3) - Depreciation for Year 4 = 43,336.43 - 12,377.59 = $30,958.84

Book Value (Year 5) = Book Value (Year 4) - Depreciation for Year 5 = 30,958.84 - 8,849.63 = $22,109.21

Book Value (Year 6) = Book Value (Year 5) - Depreciation for Year 6 = 22,109.21 - 8,839.72 = $13,269.49

Book Value (Year 7) = Book Value (Year 6) - Depreciation for Year 7 = 13,269.49 - 8,849.63 = $4,419.86

Book Value (Year 8) = Book Value (Year 7) - Depreciation for Year 8 = 4,419.86 - 4,419.86 = $0