Question

Use the table below to answer this question.

MACRS 5-year property
Year Rate
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%
Sun Lee's Furniture just purchased some fixed assets classified as 5-year property for MACRS. The assets cost $39,000. What is the amount of the depreciation expense for the third year?
a) $7,488
b) $12,480
c) $6,240
d) $3,744
e) $4,493

Answer 1

a) $7,488

Step-by-step explanation:

depreciation expense per year:

year 1 = $39,000 x 20% = $7,800

year 2 = $39,000 x 32% = $12,480

year 3 = $39,000 x 19.20% = $7,488 ⇒ third year

year 4 = $39,000 x 11.52% = $4,492.80

year 5 = $39,000 x 11.52% = $4,492.80

year 6 = $39,000 x 5.76% = $2,246.40

IN order to calculate MACRS depreciation, just multiply the assets depreciable value times the depreciation percentage.