Exhibit 11-05Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, Year 1.
MACRS Depreciation as a Percentage of the Cost of the AssetYear of Life3
5
7
10
1
33.33%
20.00%
14.29%
10.00%
2
44.45%
32.00%
24.29%
18.00%
3
14.81%
19.20%
17.49%
14.40%
4
7.41%
11.52%
12.49%
11.52%
5
11.52%
8.93%
9.22%
6
5.76%
8.92%
7.37%
7
8.93%
6.55%
8
4.46%
6.55%
9
6.56%
10
6.55%
11
3.28%
?
Cost$ 105,000
Estimated Economic Life7
Estimated residual value$ 15,000
Depreciation for Financial Statementsstraight-line
MACRS life5
MACRS Method200%-declining-balance
?
?
Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 5?
A. $6,048
B. $15,000
C. $12,096
D. $0
Answer: C
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