2. (10 pts) A CNC machine for the first 2 years have been calculated in table I

Question

2. (10 pts) A CNC machine for the first 2 years have been calculated in table I and table 2 with the following methods: (A) SOYD, (B) I (C) MACRS (assume 7-year property class. (D) Straight line, and (E) 150% D(B) costs $180,000, and it will be serapped after 10 years. The s180, depreciatison and the book vahuc D-2 1 $2S,722 $18,000 $32,727 $36,000 $27,000 2 S44,082 18,000 | S29,455 | $28,800 | S22950 0 s180 (a) In table 1, what is the depreciation method for values in column D-3? (2 pts) (A) SOYD (B) DDB (C) MACRS (D) Straight line (b) In table 2, what is the depreciation method for the book values in column B-4? (2pts) (E) 150% DB (A) SOYD (B) DDB (C) MACRS 3. (10 pts) Equipment costing S25,000 that is a MACRS 3-year property is disposed of during the third year for $10,000. (D) Straight line With MACRS method only half of the depreciation is allowed in the recovery year. (E) 150% DB (a) What is the book value of this equipment when it is dispose of in the third year? 65 pts) (A) $8889 (B) S3711 (C) S5562 (D) S1860 equipment. (5 pts) (B) S6289 (B) $8,889 (C) S5120 (D) $8,140 hne a first cos of $1,050,000 and a salvage value of $225,000 in any year. The

Explanation / Answer

2 a. option A. SOYD method is used

under SOYD method, depreciation = Asset value *Years outstanding at the beginning of the year/ sum of years digits

sum of years digits= n*(n+1)/2

where n= usefule life= 10*11/2=55

Depreciation = 180000 *10/55= 32727

2 b. option B. DDB is correct

under DDB depreciation rate= 2/useful life *100= 2/10 *100= 20%

Depreciation in year 1= 180000*20%= 36000

In year 2 depreciation = WDV * 20%= (180000-36000)*20%= 144000*20%= 28800

Hence DDB is used for D-4 and B-4 columns

3 a: option B is correct

3 b: option A is correct

Year Depreciation allowance rate Depreciation 1 33.33% 8332.5 2 44.45% 11112.5 3 7.41% 1851.25 a Total depreciation 21296.25 b Cost 25000 c=b-a Book value 3703.75

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