Question

11-43 A precision five-axis CNC milling machine costs $200,000, and it will be scrapped after 10 years. Compute the book value and depreciation for the first 3 years using (a) straight-line depreciation (b) double declining balance depreciation (C) 150% declining balance depreciation (d) 100% bonus depreciation (C) MACRS depreciation DOU niece of

Answer 1

a) straight-line depreciation
Year	Beginning Book Value	Depreciation Percent =1/10 yrs	Depreciation Amount	Accumulated Depreciation Amount	Ending Book Value
1	$200,000	10.00%	$20,000	$20,000	$180,000
2	$180,000	10.00%	$20,000	$40,000	$160,000
3	$160,000	10.00%	$20,000	$60,000	$140,000
b) double declining balance depreciation
Year	Beginning Book Value	Depreciation Percent =1/10 yrs x 2	Depreciation Amount	Accumulated Depreciation Amount	Ending Book Value
1	$200,000	20.00%	$40,000	$40,000	$160,000
2	$160,000	20.00%	$32,000	$72,000	$128,000
3	$128,000	20.00%	$25,600	$97,600	$102,400
c)150% declining balance depreciation
Year	Beginning Book Value	Depreciation Percent =1/10 yrs x 1.5	Depreciation Amount	Accumulated Depreciation Amount	Ending Book Value
1	$200,000	15.00%	$30,000	$30,000	$170,000
2	$170,000	15.00%	$25,500	$55,500	$144,500
3	$144,500	15.00%	$21,675	$77,175	$122,825
d) 100% bonus depreciation
Estimated Machine Price (EMP)	$200,000
Section 179 Deduction	$200,000
Balance to Depreciate over 7 Years (EMP - Section 179 Deduction)	$0
100% Bonus Depreciation	$0
Total First Year Tax Deduction (179 Ded. + Bonus Depreciation)	$200,000
e) MACRS Depreciation
Year	Adjusted Basis	Rate %	Depreciation	Cumulative	Book Value	Method
1	200,000	10	20,000	20,000	180,000	DB
2	180,000	18	36,000	56,000	144,000	DB
3	144,000	14.4	28,800	84,800	115,200	DB