Overland purchased $387,950 of fixed assets that are classified as three-year property for MACRS. The MACRS rates are .3333, .4445, .1481, and .0741 for Years 1 to 4, respectively. What is the amount of the depreciation expense in Year 3 assuming no bonus depreciation is taken?
A) $28,747.10
B) $42,399.29
C) $57,455.40
D) $59,929.11
E) $12,766.59

Question

Quizplus · Accepted Answer

To calculate the depreciation expense in Year 3, we need to first find the total depreciable cost of the asset. The depreciable cost is the cost of the asset minus any salvage value, and in this case, we assume there is no salvage value.

Depreciable cost = Cost of asset
Depreciable cost = $387,950

Next, we need to calculate the depreciation rate for Year 3. The MACRS rate for Year 3 is 0.1481, which means that we can deduct 14.81% of the depreciable cost in Year 3.

Depreciation rate for Year 3 = MACRS rate for Year 3
Depreciation rate for Year 3 = 0.1481

Finally, we can calculate the depreciation expense in Year 3 using the following formula:

Depreciation expense = Depreciable cost x Depreciation rate for Year 3
Depreciation expense = $387,950 x 0.1481
Depreciation expense = $57,455.40

Therefore, the depreciation expense in Year 3 is $57,455.40, which is option C.

Overland Purchased $387,950 of Fixed Assets That Are Classified as Three-Year