A company buys new office funiture for $75,000 with a 7-year depreciable life an

Question

A company buys new office funiture for $75,000 with a 7-year depreciable life and a $5,000 Salvage Value. Use the following depreciation methods to determine the depreciation shedule (dt) and the office funiture's book value at the end of year 5. It is not being sold in year 5.

a. Straight Line

b. Sum-of-Years'- Digits (SOYD-Method)

c. Double declining balance (DDB-Method), assume any remaining depreciation is claimed in the last year.

d. MACRS depreciation, where the Salvage Value is zero.

The Company described in problem 1 is selling the office furniture after 3 years for $40,000.

a) Determine the MACRS depreciation schedule for 3 years of ownership

b) Determine any extra taxable income (recaptured depreciation), if any, on the sale of the furniture.

Explanation / Answer

a)

b) sum of digit = 1+2+3+4+5+6+7= 28

c)

d)

2)

a)

b)taxable income = (5805-5000)= 805

Year Beginning book value Depreciation Accumulated Depreciation Ending book value 1 75000 10000 10000 65000 2 65000 10000 20000 55000 3 55000 10000 30000 45000 4 45000 10000 40000 35000 5 35000 10000 50000 25000 6 25000 10000 60000 15000 7 15000 10000 70000 5000

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