Question

Green Acres Farms just purchased a tractor on January 1, 2020.

The total purchase price (cost) was $600,000.

They expect to use the tractor for 5 years and sell for $100,000.

Assume according to MACRS, they can depreciate tractors for 3 years using 150% declining balance.

Complete the following depreciation questions.

PART A

Fill in the economic depreciation table using the straight-line method.

Year	Remaining value at beginning of year	Depreciation	Remaining value at end of year
2020	[Q30]	[Q31]	[Q32]
2021
2022			[Q33]
2023		[Q34]
2024			[Q35]

Answer 1

Depreciation using straight line method = (Cost of asset - Salvage Value)/ No of years of life

Depreciation using straight line method = (600,000-100,000)/ 5 yrs = $ 100,000 p.a.

Depreciation Chart

			Amount $
Year	Opening Balance	Depreciation	Closing Balance
	A	B	A-B
2020	600,000	100,000	500,000
2021	500,000	100,000	400,000
2022	400,000	100,000	300,000
2023	300,000	100,000	200,000
2024	200,000	100,000	100,000

Depreciation Chart as per MACRS ( Half yearly convection)

					Amount $
Year	Cost	Rate (%)	Depreciation	Opening Balance	Closing Balance
	A	B	C=A*B	D	D-C
2020	600,000	33.33	199,980	600,000	400,020
2021	600,000	44.45	266,700	400,020	133,320
2022	600,000	14.81	88,860	133,320	44,460
2023	600,000	7.41	44,460	44,460	-