Blackwater Spring and Metal utilizes the same computerized spring-forming machin
ID: 2584003 • Letter: B
Question
Blackwater Spring and Metal utilizes the same computerized spring-forming machinery in its U.S. and Malaysian plants. The first cost was $750,000 with S = $150,000 after n = 10 years. MACRS (Modified Accelerated Cost Recovery System) depreciation with n = 5 years is applied in the United States, and standard SL depreciation with n = 7 years is used by the Malaysian facility.
If the equipment is sold after 5 years for $100,000, calculate the over-and underdepreciation amounts for each method.
The overdepreciation amount is $ .
The underdepreciation amount is $
Depreciation Rate() for Each MACRS Recovery Period in Years 3 n=5 n=7 14.29 24.49 17.49 12.49 8.93 n 20 3.75 7.22 6.68 6.18 5.71 20.00 44.45 14.81 7.41 19.20 11.52 11.52 10.00 18.00 14.40 11.52 9.22 5.00 9.50 8.55 7.70 6.93 5.76 8.92 8.93 4.46 7.37 6.55 6.55 6.23 5.90 5.90 5.91 5.90 5.29 4.89 4.52 4.46 4.46 10 6.55 4.46 4.46 4.46 4.46 4.46 3.28 5.91 5.90 5.91 5.90 5.91 12 15 16 17-20 21 4.46 4.46 2.95Explanation / Answer
Calculation of deprecitation as per MACRS double declining depereciation rate
After 5 year the book value will be =$43,200
Accumulated depreciation =$706,800
Calculation of deprecitation as per MACRS straight line depereciation rate
Accumulated depreciation =$385,714.
Hope this helps
Year Adjusted Basis Rate % Depreciation Cumulative Book Value Method 1 750,000 20 150,000 150,000 600,000 DB 2 600,000 32 240,000 390,000 360,000 DB 3 360,000 19.2 144,000 534,000 216,000 DB 4 216,000 11.52 86,400 620,400 129,600 SL 5 129,600 11.52 86,400 706,800 43,200 SL 6 43,200 5.76 43,200 750,000 0 SLRelated Questions
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