A belt-conveyor purchased for $140, 000 has shipping and installation costs of $

Question

A belt-conveyor purchased for $140, 000 has shipping and installation costs of $20, 000. It was expected to last 6 years, when it would be sold for $25, 000 after paying $5000 for dismantling. Instead, it lasted 4 years, and several workers were permitted to take it apart on their own time for reassembly at a private technical school. How much gain, loss, or recaptured depreciation is there? Assume 7-year MACRS depreciation Straight-line depreciation Sum-of-years'-digits (SOYD) depreciation 150% declining balance depreciation

Explanation / Answer

Cost of the Belt-Conveyor Particulars Amount($) Cost of the Belt-Conveyor 140000 Add: Installation costs 20000 Total Cost of the Belt-Conveyor 160000 7- year MACRS Depreciation Year Rate Depreciation Year 1 14.29% 22864 Year 2 24.49% 39184 Year 3 17.49% 27984 Year 4 12.49% 19984 Total Depreciation 110016 Book Value at the end of year 4 (160000-110016) 49984 Sale value after dismantiling cost (25000-5000) 20000 Loss on sale of Asset after year 4 -29984 Straight Line depreciation Year Rate Depreciation Year 1 (1/6) 16.67% 26667 Year 2 16.67% 26667 Year 3 16.67% 26667 Year 4 16.67% 26667 Total Depreciation 106667 Book Value at the end of year 4 (160000-106667) 53333 Sale value after dismantiling cost (25000-5000) 20000 Loss on sale of Asset after year 4 -33333 Sum of Digits (SOYD) deprecaition Year Rate Depreciation Year 1 (1/21)                         0.05 7619 Year 2(2/21)                         0.10 15238 Year 3(3/21)                         0.14 22857 Year 4(4/21)                         0.19 30476 Total Depreciation 76190 Book Value at the end of year 4 (160000-76190) 83810 Sale value after dismantiling cost (25000-5000) 20000 Loss on sale of Asset after year 4 -63810 150% Declining Method: Year Rate Depreciation WDV Closing Balance Year 1 ((1/6)*150% 25.00% 40000 120000 Year 2 25.00% 30000 90000 Year 3 25.00% 22500 67500 Year 4 25.00% 16875 50625 Total Depreciation 109375 Book Value at the end of year 4 (160000-109375) 50625 Sale value after dismantiling cost (25000-5000) 20000 Loss on sale of Asset after year 4 -30625

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