Manufacturing equipment has a capital cost of $43,000, salvage value of $3000, and an asset life...

Manufacturing equipment has a capital cost of $43,000, salvage value of $3000, and an asset life of 10 years. Compute the depreciation expense for the first 3 years under (a) accelerated cost recovery and (b) straight line. (Hint: page 142 and 145) (

Expert Solution

a) Since the asset life is 10 years, we can use MACRS percentage for 10-year property class. (MACRS table given at the end of this solution)

Year	MACRS	Cost of Asset	Decpreciation
-	-	-	*Cost of Asset MACRS**
1	10.00%	43,000	4,300
2	18.00%	43,000	7,740
3	14.40%	43,000	6,192
Total			18,232

Therefore, Depreciation for 3 years = $18,232

b)

Depreciation under straight line method:

Therefore,

Depreciation in straight line method will remain same throughout the life of the asset.

That means:

Depreciation for 3 years = $4000 * 3 = $12,000

MACRS table for your reference:

jeff jeffy answered 1 year ago

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