Suppose you have organized a pharmaceutical unit under the name Heal Pharmaceutical to develop and manufacture COVID 19 vaccine on December 1, 2019. In order to strengthen your operations, you have purchased the following machine and furniture:

1. Purchased a complete set of capsule manufacturing machine on December 1, 2019, having cost $5,750,000 with a residual value of $475,000 and an estimated useful life of 7 years.
2. Purchased furniture of $799,000 on December 15, 2019, with residual value of $75,000 and an estimated useful life of 5 years.

Instructions:

1. How much will be the depreciation amount reported in income statement of your business as at December 31, 2019 if you are following half-year convention?
2. What will be the book value of both assets that you have to report in balance sheet of your business as at December 31, 2019?
3. Calculated depreciation expense of each year for full life of capsule manufacturing machine by using straight-line (half year convention) and MACRS method (for income tax purposes, this machinery qualifies as 5-Year property).

Years	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
MACRS Rate	20%	32%	19.20%	11.52%	11.52%	5.76%

4. Prepare the depreciation schedule of capsule manufacturing machine by the straight-line method (half year convention).
5. What will be the book value of the capsule manufacturing machine after completion of its useful life?

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