What is the depreciation deduction, using each of the following methods, for the

Question

What is the depreciation deduction, using each of the following methods, for the second year for an asset that costs $31,000 and has an estimated MV of $6,000 at the end of its six-year useful life? Assume its MACRS class life is also six years. (a) 200% DB, (b) GDS (MACRS), and (c) ADS (MACRS) Click the icon to view the summary of the principal features of GDS under MACRS Click the icon to view the GDS Recovery Rates (R). a. Using the 200% DB method the depreciation deduction for the second year is $ nearest dollar.) (Round to the

Explanation / Answer

Please note that in 200% Declining Balance , the depreciation is charged doible of its rate. So first we have to calculate Depreciation rate.

Yearly Depreciation = 31,000/6

= $5,167

% of Depreciation = 5,167 / 31,000

= 16.67%

Now for 200% DB the depreciation rate will be doubled.

So the depreciation rate = 16.77 * 2

= 33.34%

First year Depreciation = 31,000 * 33.34%

= $10,335

First year Net book Value = 31,000 - 10,335

= $20,665

Second year Depreciation = 20,665 * 33.34%

= $6,890

So the depreciation as per 200% DB in sexond year will be $6,890.

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