A company report stated that a $140,000 asset pur­chased 3 years ago has a current MACRS book value that is 57.6% of the asset’s basis. (a) Deter­mine the recovery period used. (b) Determine the depreciation next year using the VDB spreadsheet function.

What will be an ideal response?


(a) Total depreciation for 3 years = 100% – 57.6%
= 42.4%

Look in MACRS rate table for column that has total depreciation of 42.4% for first
three years

Check n = 7: Sum = 14.29 +24.49 +17.49 = 56.27% (too high)
Check n = 10: Sum = 10.0 +18.0 +14.4 = 42.4 OK

Recovery period is n = 10 years

(b) Function = VDB(140000,0,10,MAX(0,4-1.5),MIN(10,4-0.5),2) displays the value
D4 = $16,128

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