Question

A power-producing unit has installed a new computer to control one of its units.
a. For a 5-year property class, what would the depreciation percentage be for the third year after the installation when using MACRS (GDS)
b. Rework the question using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method.

please explain the answer

Answer 1

In case of 5 year property class the recovery period is 6 years and the depreciation rate is 20%, 32%, 19.2%, 11.52%, 11.52% and 5.76% for the six years.

In third year the depreciation rate = 19.2%

b. In case of 3 year property class the recovery period is 4 years and the rate of depreciation is 33.33%, 44.45%, 14.81% and 7.41% for the four years in the given sequence.

Depreciation in the 3rd year = 14.81%

In case of straight line method the recovery period is 4 years and the salvage value = $ 0.

In case of straight line method the depreciation charge is 25% each years.

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No value is provided so I think only percentage was asked.