Question

In 2019, Canes Inc. purchased equipment classified as 5 Year property. The cost of the equipment is $85,000 and the salvage value is $5,000.

What is the MACRS Depreciation for Year 3?

Answer 1

Answer = $ 16,320
Explanation:
Calculate the MACRS Depreciation
Recovery Year	5-Year	Depreciation	Book Value
1	20.00%	$17,000        {$85,000*20%}	$68,000 {85,000-17,000}
2	32.00%	$27,200        {$85,000*32%}	$40,800 {68,000-27,200}
3	19.20%	$16,320        {$85,000*19.20%}	$24,480 {40,800-16,320}
4	11.52%	$9,792        {$85,000*11.52%}	$14,688 {24,480-9,792}
5	11.52%	$9,792        {$85,000*11.52%}	$4,896    {14,688-9792}
6	5.76%	$4,896        {$85,000*5.76%}	$0              {4,896-4,896}
Here, Using MACRS Approach , Salvage value is not deducted while doing the
calculation of Book Value .
So, MACRS Depreciation for Year = $ 16,320   {$85,000*19.20%}