Question

A lumber company purchases and installs a wood chipper for $204,000. The chipper is classified as MACRS 7-year property. Its useful life is 10 years. The estimated salvage value at the end of 10 years is $25,000. Using MACRS depreciation, compute the first-year depreciation.

Answer 1

the first year depreciation using MACRS depreciation is $28,580

Step-by-step explanation:

The computation of the first year depreciation using MACRS depreciation is given below:

Here the depreciation rate is 14.29% for the first year

And, the cost of the wood chipper is $204,000

So, the first year depreciation expense is

= $204,000 × 14.29%

= $28,580

Hence the first year depreciation using MACRS depreciation is $28,580