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Using the MACRS rates from the table, what is the book value of a \[tex]$2,500 computer after 4 years?

\[
\begin{tabular}{|c|r|}
\hline Year & MACRS Rate \\
\hline 1 & 20.0\% \\
\hline 2 & 32.0\% \\
\hline 3 & 19.2\% \\
\hline 4 & 11.52\% \\
\hline 5 & 11.52\% \\
\hline 6 & 5.76\% \\
\hline
\end{tabular}
\]

\[
\text{Book Value} = \$[/tex][\text{?}]
\]

Round to the nearest cent.

Sagot :

GinnyAnswer
To determine the book value of a [tex]$2,500 computer after 4 years using the MACRS (Modified Accelerated Cost Recovery System) method, follow these steps: 1. Identify the MACRS rates for each year: - Year 1: \( 20.0\% \) - Year 2: \( 32.0\% \) - Year 3: \( 19.2\% \) - Year 4: \( 11.52\% \) 2. Calculate the depreciation for each year: - Depreciation for Year 1: \( 2500 \times 0.20 = 500 \) - Depreciation for Year 2: \( 2500 \times 0.32 = 800 \) - Depreciation for Year 3: \( 2500 \times 0.192 = 480 \) - Depreciation for Year 4: \( 2500 \times 0.1152 = 288 \) 3. Sum the total depreciation over the 4 years: Accumulated Depreciation = \( 500 + 800 + 480 + 288 = 2068 \) 4. Calculate the book value after 4 years: Book Value = Initial Cost - Accumulated Depreciation Book Value = \( 2500 - 2068 = 432 \) 5. Ensure the book value is rounded to the nearest cent: The calculation already provides a whole number, so no rounding is necessary. Thus, the book value of the $[/tex]2,500 computer after 4 years is [tex]\( \$ 432.00 \)[/tex].
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