A global positioning system (GPS) receiver is purchased for $2,000. The IRS informs your company that the useful (class) life of the system is eight years. The expected market (salvage) value is $300 at the end of year eight. a. Use the straight line method to calculate depreciation in year three. b. Use the 200% declining balance method to calculate the cumulative depreciation through year four. c. Use the MACRS method to calculate the cumulative depreciation through year five. d. What is the book value of the GPS receiver at the end of year four when straight line depreciation is used? a. Using the SL method, the depreciation amount in year three is $ (Round to the nearest dollar.) Year 1 2 3 4 5 6 GDS Recovery Rates (rk) for the Six Personal Property Classes Recovery Period (and Property Class) 3-year 5-yeara 7-year 10-yeara 15-yearb 0.3333 0.2000 0.1429 0.1000 0.0500 0.4445 0.3200 0.2449 0.1800 0.0950 0.1481 0.1920 0.1749 0.1440 0.0855 0.0741 0.1152 0.1249 0.1152 0.0770 0.1152 0.0893 0.0922 0.0693 0.0576 0.0892 0.0737 0.0623 0.0893 0.0655 0.0590 0.0446 0.0655 0.0590 0.0656 0.0591 0.0655 0.0590 0.0328 0.0591 0.0590 0.0591 0.0590 0.0591 0.0295 7 8 9 10 20-yearb 0.0375 0.0722 0.0668 0.0618 0.0571 0.0528 0.0489 0.0452 0.0447 0.0447 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0223 11 12 13 14 15 16 17 18 19 20 21 *These rates are determined by applying the 200% DB method (with switchover to the SL method) to the recovery period with the half-year convention applied to the first and last years. Rates for each period must sum to 1.0000. "These rates are determined with the 150% DB method instead of the 200% DB method (with switchover to the SL method) and are rounded off to four decimal places. MACRS (GDS) Property Classes and Primary Methods for Calculating Depreciation Deductions GDS Property Class and Class Life (Useful Special Rules Depreciation Method Life) 3-year, 200% DB with Four years or Includes some race horses and tractor switchover to SL less units for over-the-road use. 5-year, 200% DB with More than 4 Includes cars and light trucks, switchover to SL years to less semiconductor manufacturing than 10 equipment, qualified technological equipment, computer-based central office switching equipment, some renewable and biomass power facilities, and research and development property. 7-year, 200% DB with 10 years to less Includes single-purpose agricultural switchover to SL than 16 and horticultural structures and railroad track. Includes office furniture and fixtures, and property not assigned to a property class. 10-year, 200% DB with 16 years to less Includes vessels, barges, tugs, switchover to SL than 20 and similar water transportation equipment 15-year, 150% DB with 20 years to less Includes sewage treatment plants, switchover to SL than 25 telephone distribution plants, and equipment for two-way voice and data communication 20-year, 150% DB with 25 years or Excludes real property of 27.5 years or switchover to SL more more. Includes municipal sewers. 27.5 year, SL N/A Residential rental property. 39-year, SL N/A Nonresidential real property. A global positioning system (GPS) receiver is purchased for $2,000. The IRS informs your company that the useful (class) life of the system is eight years. The expected market (salvage) value is $300 at the end of year eight. a. Use the straight line method to calculate depreciation in year three. b. Use the 200% declining balance method to calculate the cumulative depreciation through year four. c. Use the MACRS method to calculate the cumulative depreciation through year five. d. What is the book value of the GPS receiver at the end of year four when straight line depreciation is used? a. Using the SL method, the depreciation amount in year three is $ (Round to the nearest dollar.) Year 1 2 3 4 5 6 GDS Recovery Rates (rk) for the Six Personal Property Classes Recovery Period (and Property Class) 3-year 5-yeara 7-year 10-yeara 15-yearb 0.3333 0.2000 0.1429 0.1000 0.0500 0.4445 0.3200 0.2449 0.1800 0.0950 0.1481 0.1920 0.1749 0.1440 0.0855 0.0741 0.1152 0.1249 0.1152 0.0770 0.1152 0.0893 0.0922 0.0693 0.0576 0.0892 0.0737 0.0623 0.0893 0.0655 0.0590 0.0446 0.0655 0.0590 0.0656 0.0591 0.0655 0.0590 0.0328 0.0591 0.0590 0.0591 0.0590 0.0591 0.0295 7 8 9 10 20-yearb 0.0375 0.0722 0.0668 0.0618 0.0571 0.0528 0.0489 0.0452 0.0447 0.0447 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0446 0.0223 11 12 13 14 15 16 17 18 19 20 21 *These rates are determined by applying the 200% DB method (with switchover to the SL method) to the recovery period with the half-year convention applied to the first and last years. Rates for each period must sum to 1.0000. "These rates are determined with the 150% DB method instead of the 200% DB method (with switchover to the SL method) and are rounded off to four decimal places. MACRS (GDS) Property Classes and Primary Methods for Calculating Depreciation Deductions GDS Property Class and Class Life (Useful Special Rules Depreciation Method Life) 3-year, 200% DB with Four years or Includes some race horses and tractor switchover to SL less units for over-the-road use. 5-year, 200% DB with More than 4 Includes cars and light trucks, switchover to SL years to less semiconductor manufacturing than 10 equipment, qualified technological equipment, computer-based central office switching equipment, some renewable and biomass power facilities, and research and development property. 7-year, 200% DB with 10 years to less Includes single-purpose agricultural switchover to SL than 16 and horticultural structures and railroad track. Includes office furniture and fixtures, and property not assigned to a property class. 10-year, 200% DB with 16 years to less Includes vessels, barges, tugs, switchover to SL than 20 and similar water transportation equipment 15-year, 150% DB with 20 years to less Includes sewage treatment plants, switchover to SL than 25 telephone distribution plants, and equipment for two-way voice and data communication 20-year, 150% DB with 25 years or Excludes real property of 27.5 years or switchover to SL more more. Includes municipal sewers. 27.5 year, SL N/A Residential rental property. 39-year, SL N/A Nonresidential real property
