A machine was purchased for $100,000. Estimated salvage is $27,000 in 7 years. 3

Question

A machine was purchased for $100,000. Estimated salvage is $27,000 in 7 years. 3 year MACRS depreciation is being used. (33.33, 44.45, 14.81, 7.41). The machine will be kept for 7 years and then sold for $40,000. Calculate the annual equivalent depreciation over the seven year life.A machine was purchased for $100,000. Estimated salvage is $27,000 in 7 years. 3 year MACRS depreciation is being used. (33.33, 44.45, 14.81, 7.41). The machine will be kept for 7 years and then sold for $40,000. Calculate the annual equivalent depreciation over the seven year life.

Explanation / Answer

MACRS depreciation is taken from the MACRS depreciation table

year deprciation rate Depreciation expense 1 33.33% 33330 2 44.45% 44450 3 14.81% 14810 4 7.41% 7410 MACRS depreciation for 7 years life year deprciation rate Depreciation expense 1 14.29% 14290 2 24.49% 24490 3 17.49% 17490 4 12.49% 12490 5 8.93% 8930 6 8.92% 8920 7 8.93% 8930

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