It is Jan 1. The Rumpel Felt Company purchased a felt press last year at a cost

Question

It is Jan 1. The Rumpel Felt Company purchased a felt press last year at a cost of $ 7 comma 500 $7,500. The machine had an expected life of 3 years at the time of purchase. The machine was depreciated using MACRS with a? 5-year recovery period.? (MACRS depreciation rates are shown in the table LOADING... ?.) The division manager reports? that, for $ 12 comma 000 $12,000 ?(including installation), a new felt press can be bought. The new machine will also be depreciated with a? 5-year recovery period. The new felt press will expand? sales, because the new fashion is for smoother felt. What is the incremental depreciation expense at the end of the first year after the? replacement? The incremental depreciation expense at the end of the first year is ?$ . ?(Round to the nearest whole? dollar.)

Explanation / Answer

Cost of old press= $7500

Depreciation expense last year= 7500*20%= $1500

Depreciation expense in year 1 after replacement = 7500*32% = $2400

Cost of new machine= $12000

Depreciation expense in year 1 after replacement = 12000*20% = $2400

Incremental depreciation = (2400-2400) = $0

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