5. MACRS Fixed Annual Expense Percentages by Recovery Class

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Year	3-Year	5-Year	7-Year	10-Year
1	33.33%	20.00%	14.29%	10.00%
2	44.45%	32.00%	24.49%	18.00%
3	14.81%	19.20%	17.49%	14.40%
4	7.41%	11.52%	12.49%	11.52%
5		11.52%	8.93%	9.22%
6		5.76%	8.93%	7.37%
7			8.93%	6.55%
8			4.45%	6.55%
9				6.55%
10				6.55%
11				3.28%

Depreciation expense. Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for $95,000. Calculate the depreciation schedule using a seven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS, Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate. What do you notice about the difference between these two methods?

Question content area top

Part 1

Depreciation expense. Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for

$95,000.

Calculate the depreciation schedule using a seven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS, Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate. What do you notice about the difference between these two methods?

Question content area bottom Part 1 Using a seven-year life, straight-line depreciation, and the half-year convention for the first and last years, what is the annual depreciation of the trimmer?

$13571.4313571.43(Round to the nearest dollar.)

Part 2 Using a seven-year life, straight-line depreciation, and the half-year convention for the first and last years, what is the depreciation for the first and last years? $6785.716785.71(Round to the nearest dollar.)

Need help on part 3

Part 3 Using a seven-year life and MACRS depreciation,

what is the annual depreciation of the trimmer for year 1?

$enter your response here

(Round to the nearest dollar.)

6. Cost recovery. Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer for $82,000. It is classified in the property class category of asingle-purpose agricultural and horticultural structure. Then the company sold the tree trimmer after four years of service. If a seven-year life and MACRS, was used for the depreciation schedule, what is the after-tax cash flow from the sale of the trimmer (use a 35% tax rate) if

a.the sales price was $36,000?

b.the sales price was $25,616.80?

c.the sales price was $22,000?

MACRS Fixed Annual Expense Percentages by Recovery Class

Click on this icon

to download the data from this table

Year	3-Year	5-Year	7-Year	10-Year
1	33.33%	20.00%	14.29%	10.00%
2	44.45%	32.00%	24.49%	18.00%
3	14.81%	19.20%	17.49%	14.40%
4	7.41%	11.52%	12.49%	11.52%
5		11.52%	8.93%	9.22%
6		5.76%	8.93%	7.37%
7			8.93%	6.55%
8			4.45%	6.55%
9				6.55%
10				6.55%
11				3.28%

a.If the sales price is $36,000,

what is the after-tax cash flow?

(Round to the nearest cent.)