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Using the MACRS rates from the 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 :

GinnyAnswer
To determine the book value of a [tex]$\$[/tex]2500[tex]$ computer after 3 years using the MACRS rates provided, we'll follow these steps: 1. Identify the MACRS rates for each of the first three years: - Year 1: \(20.0\% = 0.20\) - Year 2: \(32.0\% = 0.32\) - Year 3: \(19.2\% = 0.192\) 2. Calculate the depreciation for each of the three years: - Depreciation for Year 1: \[ \text{Depreciation Year 1} = \$[/tex]2500 \times 0.20 = \[tex]$500.00 \] - Depreciation for Year 2: \[ \text{Depreciation Year 2} = \$[/tex]2500 \times 0.32 = \[tex]$800.00 \] - Depreciation for Year 3: \[ \text{Depreciation Year 3} = \$[/tex]2500 \times 0.192 = \[tex]$480.00 \] 3. Calculate the accumulated depreciation over the first three years: \[ \text{Accumulated Depreciation} = \$[/tex]500.00 + \[tex]$800.00 + \$[/tex]480.00 = \[tex]$1780.00 \] 4. Determine the book value after 3 years: \[ \text{Book Value} = \$[/tex]2500 - \[tex]$1780.00 = \$[/tex]720.00
\]

Therefore, the book value of the computer after 3 years is [tex]\(\$720.00\)[/tex].

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