Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for $88,000. Calculate the depreciation schedule using a seven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS. Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate.
|
Year |
3-Year |
5-Year |
7-Year |
10-Year |
|
|
1 |
33.33% |
20.00% |
14.29% |
10.00% |
|
|
2 |
44.45% |
32.00% |
24.49% |
18.00% |
|
|
3 |
14.81% |
19.20% |
17.49% |
14.40% |
|
|
4 |
7.41% |
11.52% |
12.49% |
11.52% |
|
|
5 |
11.52% |
8.93% |
9.22% |
||
|
6 |
5.76% |
8.93% |
7.37% |
||
|
7 |
8.93% |
6.55% |
|||
|
8 |
4.45% |
6.55% |
|||
|
9 |
6.55% |
||||
|
10 |
6.55% |
||||
|
11 |
3.28% |
a) Using a seven-year life, straight-line depreciation, and the half-year convention for the first and last years, what is the annual depreciation of the trimmer?
b) Using a seven-year life, straight-line depreciation, and the half-year convention for the first and last years, what is the annual depreciation for the first and last years?
c) Using a seven-year life and MACRS depreciation, what is the annual depreciation of the trimmer for year 1?
d) What is the annual depreciation of the trimmer for year 1? year 2? year 3? year 4? year 5? year 6? year 7? year 8?
a. For SL depreciation, 1st and last year depreciation (using half-year convention) = 88000/7/2 = 6286
For years 2-7, depreciation = 88000/7 = 12571
| $88,000 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| Depreciation | 6286 | 12571 | 12571 | 12571 | 12571 | 12571 | 12571 | 6286 |
| Accumulated Depreciation | 6286 | 18857 | 31429 | 44000 | 56571 | 69143 | 81714 | 88000 |
b. Anual depreciation for first ad last years = 6286
c. Using MACRS, first year deprecation = 88000*14.29% = 12575
Year 2 = 88000*24.49% = 21551
Year 3 = 88000 * 17.49% = 15391 and so on
| $88,000 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| MACRS | 14.29% | 24.49% | 17.49% | 12.49% | 8.93% | 8.93% | 8.93% | 4.45% |
| Depreciation | 12575 | 21551 | 15391 | 10991 | 7858 | 7858 | 7858 | 3916 |
| Accumulated Depreciation | 12575 | 34126 | 49518 | 60509 | 68367 | 76226 | 84084 | 88000 |
Get Answers For Free
Most questions answered within 1 hours.