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].
