Question

A groundwater treatment system is needed to remediate a solvent-contaminated aquifer. The system costs $2,500,000. It is expected to operate a total of 130,000 hours over a period of 10 years and then have a $250,000 salvage value. During its first year in service, it is operated for 6500 hours. What is its depreciation in the first year using the MACRS method?(A) $113,000(B) $125,000(C) $225,000(D) $250,000

Answer 1

C.) $225,000

Step-by-step explanation:

The modified accelerated cost recovery system (MACRS) is a depreciation system used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of an asset to be recovered over a specified period via annual deductions. The MACRS system puts fixed assets into classes that have set depreciation periods.

Subtract the asset's salvage value from its cost to determine the amount that can be depreciated. Divide this amount by the number of years in the asset's useful lifespan.

Then for monthly

Divide by 12 to tell you the monthly depreciation for the asset.

$2500000-$250000= $2250000

2250000/10= 225000