Using the MACRS rates from the following table, what is the book value of a [tex][tex]$\$[/tex]2,500[tex]$[/tex] computer after 3 years?

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

Book Value [tex]$[/tex]=\[tex]$ ? $[/tex][/tex]

Round to the nearest cent.



Answer :

To find the book value of a [tex]$2,500 computer after 3 years using the MACRS rates, follow these steps: 1. Initial Value: \[ \text{Initial Value} = \$[/tex]2,500
\]

2. MACRS Rates:
[tex]\[ \text{Year 1} = 20.0\% \][/tex]
[tex]\[ \text{Year 2} = 32.0\% \][/tex]
[tex]\[ \text{Year 3} = 19.2\% \][/tex]

3. Calculate depreciation for each year:
- Year 1:
[tex]\[ \text{Depreciation}_{\text{Year 1}} = \$2,500 \times 0.20 = \$500 \][/tex]

- Year 2:
[tex]\[ \text{Remaining Value after Year 1} = \$2,500 - \$500 = \$2,000 \][/tex]
[tex]\[ \text{Depreciation}_{\text{Year 2}} = \$2,000 \times 0.32 = \$640 \][/tex]

- Year 3:
[tex]\[ \text{Remaining Value after Year 2} = \$2,000 - \$640 = \$1,360 \][/tex]
[tex]\[ \text{Depreciation}_{\text{Year 3}} = \$1,360 \times 0.192 = \$261.12 \][/tex]

4. Total depreciation over 3 years:
[tex]\[ \text{Total Depreciation} = \$500 + \$640 + \$261.12 = \$1,401.12 \][/tex]

5. Calculate book value after 3 years:
[tex]\[ \text{Book Value} = \$2,500 - \$1,401.12 = \$1,098.88 \][/tex]

Result:
After 3 years, the book value of the computer is:
[tex]\[ \boxed{\$1,098.88} \][/tex]