Question

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

Answer 1

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