Homework SourseAn automated inspection system purchased at a cost of 200000
An automated inspection system purchased at a cost of $200,000 by Mega Tech Engineering and has a useful life of 7 years. The Salvage Value is expected to be zero. The system was sold after 4 years for $150,000. Determine the depreciation recapture on this equipment. Calculate the depreciation recapture using the following methods:
A) SL
B) SOYD
C) MACRS
Show full work with hand calculations as well as excel document showing how you calculated everything out so I can learn it for myself. Thank you in advance!
Solution
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| A)All Calculations are for four years because they will be sold at 4th year | |||||||||||
| SL method depreciation is same throughout the life of the system. | |||||||||||
| Formula = (Machine Cost - Salvage Value)/life in years= (200000-0)/7 = | 28571.42857 | ||||||||||
| Year | 0 | 1 | 2 | 3 | 4 | ||||||
| System cost | -200000 | ||||||||||
| Depreciation | -28571.43 | -28571.43 | -28571.43 | -28571.43 | |||||||
| B)SOYD | Sum of year digits can be calculated as follows | ||||||||||
| SUM of DIGITS of years =( 1+2+3+4+5+6+7) =28 | |||||||||||
| Year | 0 | 1 | 2 | 3 | 4 | ||||||
| Formula for depreciation rate% | (7/28)*100 | (6/28)*100 | (5/28)*100 | (4/28)*100 | |||||||
| Depreciation rate | 25.00% | 21.43% | 17.86% | 14.29% | |||||||
| Year | 0 | 1 | 2 | 3 | 4 | ||||||
| System cost | -200000 | ||||||||||
| Depreciation=System cost * depreciation rate | -50000.00 | -42857.14 | -35714.29 | -28571.43 | |||||||
| | |||||||||||
| c) MACRS method | |||||||||||
| MACRS rate as per table available online for 7 year | 14.29% | 24.49% | 17.49% | 12.49% | |||||||
| Depreciation = System Cost * Macrs rate | -28580 | -48980 | -34980 | -24980 | |||||||
