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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Use the information in Problem A-1 to solve this problem. Assume that the van is five-year property for tax purposes.

Required

Prepare a schedule of depreciation under MACRS. Round figures to the nearest whole dollar.

PROBLEM A-1 A delivery van was bought for $18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be $2,000.

Check Figure

Year 3 depreciation, $3,456

To determine

Prepare depreciation schedule for the five year estimated useful life of the delivery van under the method useful for tax purposes.

Explanation

Modified accelerated cost recovery system (MACRS): This is a depreciation method permitted by Internal Revenue Service to be used for federal income tax purposes because this method allows to record higher depreciation expense for certain years.

Formula for MACRS depreciation method:

Depreciation expense}=Cost × Depreciation rate

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