Question

Your company just bought a new distillation unit for $175,000 to be used for research and development. Such equipment has a 3-year MACRS classification. The MACRS percentages are 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent, respectively. What is the book value of the distillation unit at the end of year 2?A) $12,968.00B) $38,902.50C) $49,833.50D) $77,770.00E) $116,673.50

Answer 1

B) $38,902.50

Step-by-step explanation:

The MACRS percentages are

First year = 33.33 percent

Second year = 44.44 percent

Third year = 14.82 percent

Fourth year = 7.41 percent

First Year 33.33% = $175,000 * 33.33/100 = $116,672.50

Second Year 44.44% = $116,672.50 - ($175,000 * 44.44/100)

= $116,672.50 - $77,770.00 = $38,902.50