Question

Special tools in a 3-year property class have been bought at a cost of $15,000 for the manufacture of some critical parts in a plastic company. It is estimated that the salvage value at the end of a three-year useful life is $1000. (15 points)

a) The second -year MACRS depreciation is equal to:________
b) The second-year SOYD depreciation is equal to:________

Answer 1

Special Tools MACRS and SOYD

a) The second -year MACRS depreciation is equal to:________

= $6,668

b) The second-year SOYD depreciation is equal to:________

= $4,667

Step-by-step explanation:

a) Data and Calculations:

Cost of special tools= $15,000

Estimated salvage value = $1,000

Special tools depreciable amount = $14,000 ($15,000 - $1,000)

Property Class = 3-year

Second-year Modified Accelerated Cost Recovery System (MACRS) for 3-year property class = 44.45%

Depreciation expense for the second year = $6,668 ($15,000 * 44.45%)

Second-year Sum-of-the-years-digit (SOYD) = $4,667 ( 2/6 * $14,000)