A firm is considering purchasing an asset that will cost $1 million. Other depreciable costs include $100,000 in installation costs. If the asset is classified in the 3-year class, what is the annual depreciation for each year for this asset using the fixed depreciation percentages given by MACRS? (The percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively.)

The correct answer for year 1 is $366,630, for year 2 is $488,950, for year 3 is $162,910, and for year 4 is $81,510.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the annual depreciation by using following formula:

Annual depreciation = Total cost × MACRS rate

Where, total cost = $1,000,000 + $100,000 = $1,100,000

By putting the value, we get

Annual Depreciation year 1

= $1,100,000 × 33.33%  

= $366,630

Annual Depreciation year 2

= $1,100,000 × 44.45%  

= $488,950

Annual Depreciation year 3

= $1,100,000 × 14.81%  

= $162,910

Annual Depreciation year 4

= $1,100,000 × 7.41%  

= $81,510

its kinda hard to answer this when we dont have all the information that we need.