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What is the depreciation? deduction, using each of the following? methods, for the third year for...

What is the depreciation? deduction, using each of the following? methods, for the third year for an asset that costs ?$32,000 and has an estimated MV of ?$7,000 at the end of its nine?-year useful? life? Assume its MACRS class life is also nine years.? (a) 200?% ?DB, (b) GDS? (MACRS), and? (c) ADS? (MACRS).

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Answer #1

Calculation of depreciation

1) 200% DB

Rate of depreciation = (32000-7000)/9 = $2777.77

-? 2777.77 / 25000 =?11.11% * 2 = 22.22%

Yr 1 cost of asset = 32000

- depr @11.11% = 3556

till WDV =? 28444 year 1

- depr @22.22% = 6321

till WDV =? 22123 year 2

- depr @ 22.22% = 4916

till WDV =? 17207 year 3

Therefore depreciation for the 3rd year is $4916

2) GDS method i.e. General depreciation system is of the sub type of MACRS (modified accelerated cost recovery system) . It is the declining method of depreciation.

Rate of depreciation = (32000- 7000)/9 = 2777.77

now , 2777.77 / 25000 = 11.11%

year 1 : cost of asset = 32000

- depr @11.11%= 3556  

WDV year 1 = 28444

-depr @ 11.11%= 3160

WDV Year 2 = 25284

- depr @ 11.11%= 2809

WDV year 3 = 22475

Therefore , depreciation at year end 3 shall be $ 2809

3) ADS method of depreciation i.e: alternative depreciation system. It is also a sub type of MACRS.

The ADS offers depreciation over a longer course of time, the yearly deductions for depreciation are smaller than the other method.

Here in this ques , new number of year is not provided. so we cannot calculate ads depreciation.

We can either assume any year and then calculate depreciation.

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