Question

In: Finance

Will Do, Inc. just purchased some equipment at a cost of $650,000. What is the proper...

Will Do, Inc. just purchased some equipment at a cost of $650,000. What is the proper methodology for computing the depreciation expense for year 3 if the equipment is classified as 5-year property for MACRS?
MACRS 5-year property
Year Rate
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%

Solutions

Expert Solution

Depreciation expense for year 3=Cost*Depreciation rate for year 3

=650,000*19.2%

which is equal to

=$124800


Related Solutions

A company just purchased a piece of equipment for $650,000. The economic reality is that the...
A company just purchased a piece of equipment for $650,000. The economic reality is that the asset has an estimated useful life of ten years and will be worth $75,000 at the end of its useful life. Straight-line is the appropriate depreciation method. 1. Using excel, compute the depreciation schedule for this asset. How much depreciation expense will be taken each year? What will the asset's book value be at the end of Year 6? 2. If the company wanted...
The GetWellStayWell Company just purchased some equipment that cost $150,000. The asset is in the MACRS...
The GetWellStayWell Company just purchased some equipment that cost $150,000. The asset is in the MACRS 3-year class for depreciation. So the depreciation rates will be .33, .45, .15, and .07 for years 1 through 4, respectively. However it is expected that the asset will be sold in three years. The tax rate for the company is 21%. What is the after-tax salvage value at the end of YEAR 3 if the company receives: a) (4 pts) $20,000 (at the...
Joe’s Dry Dock Co. purchased equipment on January 1, 2015, at a cost of $650,000. The...
Joe’s Dry Dock Co. purchased equipment on January 1, 2015, at a cost of $650,000. The equipment was estimated to have a 12-year life with a residual value of $50,000. Fisher uses straight-line depreciation. At the beginning of 2020, Joe’s revised its total estimated life to total 10 years, with no residual value. Required: Prepare journal entries to record Joe's depreciation expense for both 2019 and 2020.
Your company just purchased a piece of equipment. The maintenance cost of the equipment is estimated...
Your company just purchased a piece of equipment. The maintenance cost of the equipment is estimated at $1,200 for the first year and it is to rise by $200 each year. How much should be set aside now to have enough to cover for the maintenance cost for the next 7 years? Assume payments are made at the end of each year and an interest rate of 4%.
Mercury Inc. purchased equipment in 2019 at a cost of $138,000. The equipment was expected to...
Mercury Inc. purchased equipment in 2019 at a cost of $138,000. The equipment was expected to produce 500,000 units over the next five years and have a residual value of $38,000. The equipment was sold for $78,200 part way through 2021. Actual production in each year was: 2019 = 70,000 units; 2020 = 112,000 units; 2021 = 57,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date. Required: 1. Calculate the gain or loss...
Mercury Inc. purchased equipment in 2019 at a cost of $138,000. The equipment was expected to...
Mercury Inc. purchased equipment in 2019 at a cost of $138,000. The equipment was expected to produce 500,000 units over the next five years and have a residual value of $38,000. The equipment was sold for $78,200 part way through 2021. Actual production in each year was: 2019 = 70,000 units; 2020 = 112,000 units; 2021 = 57,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date. Required: 1. Calculate the gain or loss...
Mercury Inc. purchased equipment in 2016 at a cost of $249,000. The equipment was expected to...
Mercury Inc. purchased equipment in 2016 at a cost of $249,000. The equipment was expected to produce 510,000 units over the next five years and have a residual value of $45,000. The equipment was sold for $134,800 part way through 2018. Actual production in each year was: 2016 = 71,000 units; 2017 = 114,000 units; 2018 = 58,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date. Required: 1. Prepare the journal entry to...
Mercury Inc. purchased equipment in 2019 at a cost of $212,000. The equipment was expected to...
Mercury Inc. purchased equipment in 2019 at a cost of $212,000. The equipment was expected to produce 460,000 units over the next five years and have a residual value of $28,000. The equipment was sold for $115,600 part way through 2021. Actual production in each year was: 2019 = 65,000 units; 2020 = 104,000 units; 2021 = 52,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date. Required: 1. Calculate the gain or loss...
Mercury Inc. purchased equipment in 2019 at a cost of $110,000. The equipment was expected to...
Mercury Inc. purchased equipment in 2019 at a cost of $110,000. The equipment was expected to produce 380,000 units over the next five years and have a residual value of $34,000. The equipment was sold for $63,400 part way through 2021. Actual production in each year was: 2019 = 54,000 units; 2020 = 86,000 units; 2021 = 43,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date. Required: 1. Calculate the gain or loss...
A firm purchased some office equipment for a total cost of $300000. The equipment generated net...
A firm purchased some office equipment for a total cost of $300000. The equipment generated net income of $100000 per year. The firm’s marginal tax rate is 20%. The equipment was sold at the end of the 4th year for a total of $75000. Assume that MARR is 12%/year. Calculate the net present worth (NPW) of this investment for problems 5-8. 7 (15 points). If the firm used the DDB depreciation, NPW = 8 (15 points). If the firm used...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT