Trust Engineering Company is considering the purchase of a new machine to replace an existing, worn machine. The old machine was purchased five years ago at a cost of $20,000, and it is being depreciated on a straight line basis to a salvage value of zero over its 10-year life. The new machine, which costs $30,000, falls into the Modified Accelerated Cost Recovery System (MACRS) 5-year class, and it has an estimated life of five years. If the old machine is replaced with the new machine, the change in depreciation expense that will occur in Year 3 of the new machine's life will be _____. The MACRS rates for 5-year class are Year 1 - 20%, Year 2 - 32%, Year 3 - 19%, Year 4 - 12%, Year 5 - 11%, Year 6 - 6%.
A. $2,000
B. $7,600
C. $3,700
D. $5,700
E. $18,200
Answer: D
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