On July 1, Year 1, Glover Corporation purchased $80,000 of equipment. The equipment is expected to be used in the business for five years and has an estimated salvage value of $11,000. Partial MACRS tables are listed below:
Required: a) Compute the amount of depreciation that is deductible under MACRS for Year 1 and Year 2 assuming that the equipment is classified as 5-year property.b) Compute the amount of depreciation that is deductible under MACRS for Year 1 and Year 2 assuming that the equipment is classified as 7-year property.
What will be an ideal response?
a) (1) $16,000
a) (2) $25,600
b) (1) $11,432
b) (2) $19,592
a) Five-Year Property:
(1) Year 1: Cost of 80,000 20% = $16,000
(2) Year 2: Cost of $80,000 32% = $25,600
b) Seven-Year Property:
(1) Year 1: Cost of $80,000 14.29% = $11,432
(2) Year 2: Cost of $80,000 24.49% = $19,592
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