Question

public utility purchases a gas-powered electric generator as part of an expansion program. It is expected to be useful, with proper maintenance, for an estimated 30 years. The cost is $18 million, installed. The salvage value at the end of 30 years is expected to be 10.0% of the original cost.

a. What is the MACRS-GDS property class?

b. Determine the depreciation deduction (d_t) and the unrecovered investment (B_t) for years 1, 5, and the last depreciable year of the generator.

Answer 1

a. Assets life having 30 years will fall into 20 Yrs MACRS GDS Class.

b.

Year	Depreciation Rate (%)	Cost	dt = Depreciation ($)	Cumulative depreciation	Bt = unrecovered investment
	A	B	C=A*B	D	A-D
1	3.750%	1,800,000.00	67,500.00	67,500.00	1,732,500.00
2	7.219%	1,800,000.00	129,942.00	197,442.00	1,602,558.00
3	6.677%	1,800,000.00	120,186.00	317,628.00	1,482,372.00
4	6.177%	1,800,000.00	111,186.00	428,814.00	1,371,186.00
5	5.713%	1,800,000.00	102,834.00	531,648.00	1,268,352.00
6	5.285%	1,800,000.00	95,130.00	626,778.00	1,173,222.00
7	4.888%	1,800,000.00	87,984.00	714,762.00	1,085,238.00
8	4.522%	1,800,000.00	81,396.00	796,158.00	1,003,842.00
9	4.462%	1,800,000.00	80,316.00	876,474.00	923,526.00
10	4.461%	1,800,000.00	80,298.00	956,772.00	843,228.00
11	4.462%	1,800,000.00	80,316.00	1,037,088.00	762,912.00
12	4.461%	1,800,000.00	80,298.00	1,117,386.00	682,614.00
13	4.462%	1,800,000.00	80,316.00	1,197,702.00	602,298.00
14	4.461%	1,800,000.00	80,298.00	1,278,000.00	522,000.00
15	4.462%	1,800,000.00	80,316.00	1,358,316.00	441,684.00
16	4.461%	1,800,000.00	80,298.00	1,438,614.00	361,386.00
17	4.462%	1,800,000.00	80,316.00	1,518,930.00	281,070.00
18	4.461%	1,800,000.00	80,298.00	1,599,228.00	200,772.00
19	4.462%	1,800,000.00	80,316.00	1,679,544.00	120,456.00
20	4.461%	1,800,000.00	80,298.00	1,759,842.00	40,158.00
21	2.231%	1,800,000.00	40,158.00	1,800,000.00	-

From above table:

Year	dt	Bt
1	67,500.00	1,732,500.00
5	102,834.00	1,268,352.00
21	40,158.00	-