Question

Metal Makers Ltd, has purchased a machine for $3,650,000 that will be used in a 3year project. The machine is in the 3-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively. What is the book value of the machine at the end of the project? Multiple Choice

a. $811030
b $0
c. $270465
d. $2433455

Answer 1

The book value of the machine at the end of the project is $270,465.

Step-by-step explanation:

The book value of the machine at the end of the project can be calculated using the MACRS depreciation method. The machine is in the 3-year MACRS class, so the depreciation percentages for each year are 33.33%, 44.45%, and 14.81% respectively. To calculate the book value, we subtract the accumulated depreciation from the initial cost of the machine.

Year 1 depreciation: $3,650,000 × 33.33% = $1,215,450

Year 2 depreciation: ($3,650,000 - $1,215,450) × 44.45% = $1,089,162.85

Year 3 depreciation: ($3,650,000 - $1,215,450 - $1,089,162.85) × 14.81% = $282,832.07

Book value at the end of the project: $3,650,000 - $1,215,450 - $1,089,162.85 - $282,832.07 = $1,062,555.08

Therefore, the correct answer is c. $270,465.