Acme Manufacturing is considering the purchase of a new punch press. This press

Question

Acme Manufacturing is considering the purchase of a new punch press. This press will cost $150,000 This asset will be depreciated using an MACRS (GDS) recovery period of seven years. Use this information to solve Problems 7-61 to 7-63 7-61. The depreciation amount in the third year is (a) $26,235 (b) $28,800 () $36,735 (d) $48,000 7-62. The BV at the end of the second year is (b) $113,265 c) $91,830 (a) $112,500 (d) $76,525 7-63. If the punch press is sold during the fourth year of ownership, the allowable depreciation charge for the fourth year is (a) $6,698b)$9.368 (c) $17,280 (d) $18,735

Explanation / Answer

The depreciation rates are 14.29%, 24.49%, 17.49%, 12.49%, 8.92%, 8.92%, 8.92%, 4.46%. Hence the depreciation each year will be

7-41. From the table we see that at the end of 3rd year, depreciation is 26235. Hence option A is correct

7-42.Book value at the end or 2nd year is 91830, option C is correct

7-43. Using half year convention, the depreciation will be 18735/2 = 9368. Option B is correct

Rate Depreciation Book value 14.29% 21435 128565 24.49% 36735 91830 17.49% 26235 65595 12.49% 18735 46860 8.92% 13380 33480 8.92% 13380 20100 8.92% 13380 6720

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