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Chapter 4: Q26BP (page 255)

Question: Assume $65,000 is going to be invested in each of the following assets. Using Tables 12-11 and 12-12, indicate the dollar amount of the first year鈥檚 depreciation

a. Office furniture.

b. Automobile.

c. Electric and gas utility property.

d. Sewage treatment plant.

Short Answer

Expert verified

Answer

  1. $9,295
  2. $21,645
  3. $2,470
  4. $3,250

Step by step solution

01

Definition of Depreciation

The non-cash sacrifice reported in the income statement of the business entity to allocate the capital expenditure made to acquire a fixed asset is known as depreciation.

02

Office furniture

It falls under 7 years MACRS

Depreciationexpenses=Depreciationbase脳MACRSrateforfirstyear=$65,000脳0.143=$9,295

03

Automobile

It falls under 3 years MACRS

Depreciationexpenses=Depreciationbase脳MACRSrateforfirstyear=$65,000脳0.333=$21,645

04

Electric and gas utility property

It falls under 20 years MACRS

Depreciationexpenses=Depreciationbase脳MACRSrateforfirstyear=$65,000脳0.038=$2,470

05

Sewage treatment plant

It falls under 15 years MACRS

Depreciationexpenses=Depreciationbase脳MACRSrateforfirstyear=$65,000脳0.050=$3,250

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