Question

Businesswire.com reported a shortage of inventory for new and used cars during the pandemic mainly due to mass transit riders choosing to purchase a vehicle for safer transportation coupled with the ease of the transformed digital buying process along with supply chain disruptions. New vehicle sales doubled during the pandemic pushing the average price of both new and used vehicles up to an estimated $39,500 in 2021 . What is the MACRS depreciation expense for year 4 of your $45,680 nonluxury business vehicle? Use MACRS table. Note: Round your onswer to the nearest dollar amount.

Answer 1

The MACRS depreciation expense for year 4 of a $45,680 nonluxury business vehicle is calculated by multiplying the purchase price by the year 4 depreciation rate of 11.52%, resulting in $5,266.30, which rounds to $5,266.

Step-by-step explanation:

To calculate the MACRS depreciation expense for year 4 of a $45,680 nonluxury business vehicle, you need to use the appropriate MACRS percentage for the specific recovery period of the property. Cars are typically depreciated over a 5-year period using the MACRS system. The standard MACRS depreciation rates for vehicles in each year are as follows:

• Year 1: 20%
• Year 2: 32%
• Year 3: 19.20%
• Year 4: 11.52%
• Year 5: 11.52%
• Year 6: 5.76%

Using the rate for year 4, the calculation for the depreciation expense would be:

Depreciation Expense = Purchase Price × Depreciation Rate for Year 4

Depreciation Expense = $45,680 × 0.1152

Depreciation Expense = $5,266.30

When rounded to the nearest dollar, the depreciation expense for year 4 would be $5,266.