Question 1 Your answer is partially correct. Try again. A gas-powered electric g

Question

Question 1 Your answer is partially correct. Try again. A gas-powered electric generator is purchased by a public utility as part of an expansion program. It is expected to be useful, with proper maintenance, for an estimated 30 years. The cost is $18 million, installed. The salvage value at the end of 30 years is expected to be 9.0% of the original cost. a. What is the MACRS-GDS property class? 20-Year b. Determine the depreciation deduction (dt) and the unrecovered investment (Bt) for years 1, 5, and the last depreciable year of the generator. 67 500 i, B-$. 1732500 102834: 1268352 d5 0 last year Blast year

Explanation / Answer

For the purpose of Depreciation, we have refer to the MACRS 20 years tables. Depreciation rate for the Year - 1 = 3.75%

Depreciation = Cost * Depreciation rate as per MACRS tables

Unrecovered investment value is nothing but the book value of the asset = Cost - Total Depreciation up to t = n

d1 = 18,000,000 * 3.75 % = 675000   B1 = 18,000,000 - 675,000 = 17,325,000

d5 = 18,000,000 * 5.713 % = 1028340   B5 = 18,000,000 - [ 18,000,000 * 29.536%] =  12,683,520

d last year = 18,000,000 * 2.231 = 401,580

you have almost done with the question correctly ............ except the cost of 18,000,000 had been taken as 1,800,000. Thus one zero short in the cost of asset.

All the best

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