Question

Suppose that a project has a depreciable investment of $1,000,000 and falls under the following MACRS year 5 class depreciation schedule: year 1: 20%; year 2: 32%; year 3: 19.2%; year 4: 11.5%; year 5: 11.5%; and year 6: 5.8%. Calculate depreciation for year 2.

Answer 1

The depreciation for year 2 of a project with a $1,000,000 depreciable investment using the MACRS year 5 class depreciation schedule is $320,000.

Step-by-step explanation:

To calculate the depreciation for year 2 for a project with a depreciable investment of $1,000,000 using the MACRS year 5 class depreciation schedule, we apply the year 2 percentage to the original investment. According to the MACRS schedule provided, the depreciation rate for year 2 is 32%.

To compute the exact depreciation value, we multiply the initial investment by the depreciation rate for year 2:

Depreciation for year 2 = Initial investment × Depreciation rate for year 2

= $1,000,000 × 32%

= $320,000

Therefore, the depreciation for the second year would be $320,000.

Answer 2

Depreciation for year 2 = $32,000

Step-by-step explanation:

Given

Depreciable investment = $1,000,000

Depreciation schedule:

Year 1: 20%;

Year 2: 32%;

Year 3: 19.2%;

Year 4: 11.5%;

Year 5: 11.5%;

Year 6: 5.8%

Depreciation for year 2 is calculated by multiplying the investment value by year 2 depreciation schedule.

Depreciation = Investment * Depreciation Schedule

By substitution

Depreciation = $100,000 * 32%

Depreciation = $100,000 * 0.32

Depreciation = $32,000