Question

A piece of newly purchased industrial equipment costs $969,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer 1

Calculation of annual depreciation and end of year book values for this equipment:
Year	Beginning Book Value			Depreciation allowances		Ending Book Value
	a			b		c=a-b
1	$    9,69,000.00			$    1,38,470.10		$    8,30,529.90
2	$    8,30,529.90			$    2,37,308.10		$    5,93,221.80
3	$    5,93,221.80			$    1,69,478.10		$    4,23,743.70
4	$    4,23,743.70			$    1,21,028.10		$    3,02,715.60
5	$    3,02,715.60			$       86,531.70		$    2,16,183.90
6	$    2,16,183.90			$       86,434.80		$    1,29,749.10
7	$    1,29,749.10			$       86,531.70		$       43,217.40
8	$       43,217.40			$       43,217.40		0.00
Working:
Depreciation Schedule as per MACRS depreciation method:
Year	Cost	Depreciation rate		Depreciation Expense		Accumulated Depreciation Expense		Ending Book Value
	a	b		c=a*b		d		e=a-d
1	$          9,69,000	14.29%		$    1,38,470.10		$    1,38,470.10		$ 8,30,529.90
2	$          9,69,000	24.49%		$    2,37,308.10		$    3,75,778.20		$ 5,93,221.80
3	$          9,69,000	17.49%		$    1,69,478.10		$    5,45,256.30		$ 4,23,743.70
4	$          9,69,000	12.49%		$    1,21,028.10		$    6,66,284.40		$ 3,02,715.60
5	$          9,69,000	8.93%		$       86,531.70		$    7,52,816.10		$ 2,16,183.90
6	$          9,69,000	8.92%		$       86,434.80		$    8,39,250.90		$ 1,29,749.10
7	$          9,69,000	8.93%		$       86,531.70		$    9,25,782.60		$     43,217.40
8	$          9,69,000	4.46%		$       43,217.40		$    9,69,000.00		0.00
Total				$    9,69,000.00