Pavlovich Instruments, Inc., a maker of precision telescopes, expects to report pre-tax income of $430,000 this year. The company's financial manager is considering the timing of a purchase of new computerized lens grinders. The grinders will have an installed cost of $80,000 and a cost recovery period of 5 years. Depreciate using the MACRS schedule.
MACRS or Modified Accelerated Cost Recovery System is the depreciation method used to find out depreciation amounts for tax purposes. In this method, the asset is depreciated at a higher rate at the beginning of the period and declines with the completion of asset period.
Answer and Explanation:
Depreciation rates under 5 year MACRS schedule is 20%,32%,19.20%,11.52%,11.52%,5.76%
The MACRS schedule of the asset is as follows:
|Years||Opening Value||Depreciation rate||Depreciation amount||Closing Value|
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 14