A piece of newly purchased industrial equipment costs $967,000 and is classified

Question

A piece of newly purchased industrial equipment costs $967,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Year Beginning Book Value Depreciation Ending book Value

1 $ $ $

2 $ $ $

3 $ $ $

4 $ $ $

5 $ $ $

6 $ $ $

7 $ $ $

8 $ $ $

Explanation / Answer

The depreciation rates, as per the table provided by IRS is:

Formulas used:

(i) depreciation =equipment's cost*depreciation rate. equipment's cost $967,000 and so depreciation amount for each year will be = 967,000*applicable depreciation rate

(ii) ending book value = beginning book value - depreciation.

Year Rate 1 14.29 2 24.49 3 17.49 4 12.49 5 8.93 6 8.92 7 8.93 8 4.46

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