A global positioning system (GPS) receiver is purchased for $5,500. The IRS informs your company that the useful (class) life of the system is seven years. The expected market (salvage) value is $450 at the end of year seven. 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? GDS Property Class and Depreciation Method 3-year, 200% DB with switchover to SL 5-year, 200% DB with switchover to SL 7-year, 200% DB with switchover to SL Deductions Class Life (Useful Life) Special Rules Four years or Includes some race horses and tractor less units for over-the-road use. More than 4 Includes cars and light trucks, 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. 10 years to less Includes single-purpose agricultural than 16 and horticultural structures and railroad track. Includes office furniture and fixtures, and property not assigned to a property class. 16 years to less Includes vessels, barges, tugs, than 20 and similar water transportation equipment. 20 years to less Includes sewage treatment plants, than 25 telephone distribution plants, and equipment for two-way voice and data communication. 25 years or Excludes real property of 27.5 years or more more. Includes municipal sewers. N/A Residential rental property. N/A Nonresidential real property. 10-year, 200% DB with switchover to SL 15-year, 150% DB with switchover to SL 20-year, 150% DB with switchover to SL 27.5 year, SL 39-year, SL Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 GDS Recovery Rates (rk) for the Six Personal Property Classes Recovery Period (and Property Class) 3-year 5-year 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 20-year 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
