Question

Suppose that a project has a depreciable of $600,000 and falls under the following MACRS Year 5 class depreciation schedule: Year 1: 20 percent. What is the depreciation amount for Year 1?

1) 120,000
2) 100,000
3) 80,000
4) 60,000

Answer 1

The depreciation amount for Year 1 is calculated by multiplying the depreciable basis of $600,000 by the MACRS Year 5 class depreciation rate of 20 percent, giving a total of $120,000.

Step-by-step explanation:

The question relates to calculating the depreciation amount for the first year of a project with a depreciable basis of $600,000. According to the MACRS Year 5 class depreciation schedule, the depreciation rate for the first year is 20 percent. To find the depreciation for Year 1, you multiply the depreciable basis by the depreciation rate:

Depreciation for Year 1 = Depreciable Basis × Depreciation Rate

Depreciation for Year 1 = $600,000 × 0.20

Depreciation for Year 1 = $120,000

Therefore, the correct answer is 1) $120,000.