Alter Trading purchased a shredding machine for scrap metal

Alter Trading purchased a shredding machine for scrap metal for its operations in Mobile, Alabama from Metso Oyj of Finland. Assume the machine cost $7 million and is depreciated as a 5-year asset using MACRS. If the machine is sold during year four of use, what is the book value of the machine at the time of the sale? Year 5-year Class Percentages 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 5.75%

Solution

Book value as on date of sale=Cost-Accumulated Depreciation

=$7million(1-0.2-0.32-0.192-0.1152)

which is equal to

=$1.2096million.