Troy Industries purchased a new machine 5 ?year(s) ago for $78,000.
It is being depreciated under MACRS with a? 5-year recovery period using the schedule. Assume 40% ordinary and capital gains tax rates.
a. What is the book value of the machine?
b. Calculate the firm's tax liability if it sold the machine for each of the following amounts:
$93,600;
$54,600;
$3,900;
and
$2,700.
| Rounded Depreciation Percentages by Recovery Year Using MACRS for |
| First Four Property Classes |
|
|
|
|
Percentage by recovery year* |
|
|
| Recovery year |
3 years |
5 years |
7 years |
10 years |
|
| 1 |
33% |
20% |
14% |
10% |
|
| 2 |
45% |
32% |
25% |
18% |
|
| 3 |
15% |
19% |
18% |
14% |
|
| 4 |
7% |
12% |
12% |
12% |
|
| 5 |
|
12% |
9% |
9% |
|
| 6 |
|
5% |
9% |
8% |
|
| 7 |
|
|
9% |
7% |
|
| 8 |
|
|
4% |
6% |
|
| 9 |
|
|
|
6% |
|
| 10 |
|
|
|
6% |
|
| 11 |
|
|
|
4% |
|
| Totals |
100% |
100% |
100% |
100% |
|
|
|
|
|
|
|