Question

Suppose that a project has a depreciable investment of $1,000,000 and falls under the following MACRS year 5 class depreciation schedule. What is the depreciation expense for year 1?

1) Cannot be determined
2) $200,000
3) $250,000
4) $300,000

Answer 1

The depreciation expense for year 1 cannot be determined from the information provided, as the MACRS 5-year class schedule depreciation rate for year 1 is necessary to perform the calculation. If given, you'd multiply the investment value by that rate to get the depreciation expense.

Step-by-step explanation:

Depreciation Calculation Using MACRS

To determine the depreciation expense for year 1 of a $1,000,000 depreciable investment under the Modified Accelerated Cost Recovery System (MACRS) 5-year class schedule, we need to apply the appropriate depreciation rate. Unfortunately, you haven't provided the MACRS percentage rates, which are necessary to calculate the depreciation for year 1. Typically, these rates are provided by the IRS and differ for each year of the asset's recovery period under the MACRS system.

As such, to answer your question accurately, we would need the exact rate for year 1 under the 5-year category. This rate is not among the information provided in your question or subsequent context. With the MACRS year 1 rate available, you would simply multiply the depreciable cost of the asset by the year 1 rate to get your first-year depreciation expense.

Without the specific rate, there is no exact answer from the given choices. Therefore, the correct response would be Cannot be determined from the information provided. However, if you find the applicable rate on the IRS's MACRS depreciation tables, you can easily compute the depreciation expense for the first year.