Question

# Suppose that a taxpayer places in service a \$120000 asset that is assigned to the seven-year...

Suppose that a taxpayer places in service a \$120000 asset that is assigned to the seven-year class (of depreciation) with a half-year convention. Develop the MACRS deductions (assuming 200% declining-balance rate), followed by switching to straight-line with the half-year convention. Write the depreciation amounts (in dollars) for each year.

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COURSE: ENGINEERING ECONOMI

 Double Declining Method 200% half-year convention Depreciation Schedule Depreciation Accumulated Year Basis % Expense Depreciation Book Value M 1 \$120,000 14.29% \$17,143 \$17,143 \$102,857 DB 2 \$120,000 24.49% \$29,388 \$46,531 \$73,469 DB 3 \$120,000

Working:

a)

 Depreciation Taken in First Year w/MACRS= Asset Cost × 1 × A × Depreciation Convention Useful Life

=120000*1/7*200%*1/2= \$17143

b)

 Depreciation Taken in Subsequent Years = (Asset Cost − Depreciation Taken in Previous Years) × 1 × A Recovery Period

=(120000-17143)*1/6*200%)=\$ 29388

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