2 June, 20:19

# Del Norte Brick Co. is located near the intersection of Texas, New Mexico, and Mexico. Improved access to the company's property is via a small bridge across the Rio Grande. The cost of the bridge was \$780,000. Determine the depreciation and book value for year 3 according to the MACRS (Modified Accelerated Cost Recovery System) method.

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1. 2 June, 21:45
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Depreciation for year 3 = \$115518

BV = \$57798

Explanation:

The modified accelerated cost recovery method employees a classification-based approach to depreciating certain assets, once classified are assigned respective rates of depreciation. for example, assets classified under automobiles, trucks and machinery are treated under 5-year MACRS and will be depreciated at 20%, 32%, 19.2% and so on.

In this question the bridge across Rio Grande being built by Del Norte Brick co is treated under 3-year MACRS, for which the rates are as follows:

33.33% for the first year

44.45% 2nd year

14.81% 3rd year

7.41% 4th year

We have been asked to determine 3rd years' depreciation and book value, determined as follows:

Depreciation year 1: \$780000 33.33% = \$259974

Depreciation year 2: \$780000 44.45% = \$346710

Depreciation year 3: \$780000 14.81% = \$115518

So the depreciation for year 3 = \$115518

The book value is calculated as follows:

Book value = cost - accumulated depreciation

BV = \$780000 - \$722202

BV = \$57798