51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
78
79
80
81
82
83
93
A B C D E F
dtBt
EST SALV $5,000.00 USEFUL LIFE 12
RCVD SALV $5,000.00 PERIODS 12
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0$190,000.00 $190,000.00
1$31,666.67 $158,333.33 $31,666.67 $158,333.33
2$26,388.89 $131,944.44 $26,388.89 $131,944.44
3$21,990.74 $109,953.70 $21,990.74 $109,953.70
4$18,325.62 $91,628.09 $18,325.62 $91,628.09
5$15,271.35 $76,356.74 $15,271.35 $76,356.74
6$12,726.12 $63,630.62 $12,726.12 $63,630.62
7$10,605.10 $53,025.51 $10,605.10 $53,025.51
8$8,837.59 $44,187.93 $8,837.59 $44,187.93
9$7,364.65 $36,823.27 $7,364.65 $36,823.27
10 $6,137.21 $30,686.06 $6,137.21 $30,686.06
11 $5,114.34 $25,571.72 $5,114.34 $25,571.72
12 $4,261.95 $21,309.76 $4,261.95 $21,309.76
EXC FUNC EXC FUNC
0$190,000.00
1$31,666.67 $158,333.33
2$26,388.89 $131,944.44
3$21,990.74 $109,953.70
4$18,325.62 $91,628.09
SUM DEPR $185,000.00
1
2
3
4
5
6
7
8
9
11
12
24
25
26
27
36
37
38
39
40
41
42
43
45
46
47
48
49
A B C D E F
PROBLEM 8.10
a SLN
BASIS $120,000.00
EST SALV $0.00 USEFUL LIFE 5
RCVD SALV $0.00 PERIODS 5
EOY
dtBt
1$24,000.00 $96,000.00
2$24,000.00 $72,000.00
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0
1$120,000.00 $0.00 $119,999.93 $0.07
BASIS $120,000.00 RATE 40.0000%
EST SALV $0.00 USEFUL LIFE 5
RCVD SALV $0.00 PERIODS 5
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0$120,000.00 $120,000.00
1$48,000.00 $72,000.00 $48,000.00 $72,000.00
3$17,280.00 $25,920.00 $17,280.00 $25,920.00
4$10,368.00 $15,552.00 $10,368.00 $15,552.00
5$6,220.80 $9,331.20 $6,220.80 $9,331.20
SUM DEPR $110,668.80 SUM DEPR $110,668.80
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
A B C D E F
d DDB-SLN
BASIS $120,000.00 RATE 40.0000%
EST SALV $0.00 USEFUL LIFE 5
RCVD SALV $0.00 PERIODS 5
EOY
dtBt
EXC FUNC EXC FUNC
0$120,000.00
1$48,000.00 $72,000.00
2$28,800.00 $43,200.00
3$17,280.00 $25,920.00
4$12,960.00 $12,960.00
5$12,960.00 $0.00
SUM DEPR $120,000.00
1
2
3
4
5
6
7
8
9
10
11
12
22
23
24
25
26
27
36
37
41
42
43
44
45
46
47
48
49
A B C D E F G
PROBLEM 8.11
a SLN
BASIS $17,000.00
EST SALV $3,500.00 USEFUL LIFE 6
RCVD SALV $3,500.00 PERIODS 6
EOY
dtBt
0$17,000.00
1$2,250.00 $14,750.00
2$2,250.00 $12,500.00
3$2,250.00 $10,250.00
RCVD SALV $3,500.00 PERIODS 6
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0
1$3,944.00 $13,056.00 $3,936.72 $13,063.28
cDDB
BASIS $17,000.00 RATE 33.3333%
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0$17,000.00 $17,000.00
1$5,666.67 $11,333.33 $5,666.67 $11,333.33
2$3,777.78 $7,555.56 $3,777.78 $7,555.56
3$2,518.52 $5,037.04 $2,518.52 $5,037.04
4$1,537.04 $3,500.00 $1,679.01 $3,358.02 SEE NOTE
5$0.00 $3,500.00 $1,119.34 $2,238.68 SEE NOTE
6$0.00 $3,500.00 $746.23 $1,492.46 SEE NOTE
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
A B C D E F G
SUM DEPR $13,500.00 SUM DEPR $15,507.54
NOTE! THE MANUALLY CALCULATED VALUES OF dt WOULD
NORMALLY BE ADJUSTED SUCH THAT Bt DOES NOT GO
BELOW THE SALVAGE VALUE
d DDB-SLN
BASIS $17,000.00 RATE 33.3333%
EST SALV $3,500.00 USEFUL LIFE 6
RCVD SALV $3,500.00 PERIODS 6
EOY
dtBt
EXC FUNC EXC FUNC
0$17,000.00
1$5,666.67 $11,333.33
2$3,777.78 $7,555.56
3$2,518.52 $5,037.04
4$1,537.04 $3,500.00
5$0.00 $3,500.00
6$0.00 $3,500.00
SUM DEPR $13,500.00
1
2
3
4
5
6
7
8
9
10
11
13
14
15
16
17
19
20
21
22
dtBtdtBt
24
25
28
29
30
31
32
34
35
39
40
41
42
44
45
46
47
48
50
A B C D E F
PROBLEM 8.12
a SLN
BASIS $1,600,000.00
EST SALV $100,000.00 USEFUL LIFE 5
RCVD SALV $100,000.00 PERIODS 5
EOY
dtBt
0$1,600,000.00
1$300,000.00 $1,300,000.00
2$300,000.00 $1,000,000.00
4$300,000.00 $400,000.00
5$300,000.00 $100,000.00
SUM DEPR $1,500,000.00
BASIS $1,600,000.00 RATE 42.5651%
EST SALV $100,000.00 USEFUL LIFE 5
RCVD SALV $100,000.00 PERIODS 5
EXC FUNC EXC FUNC CALC CALC
0
3$224,570.84 $302,590.76 $224,659.85 $303,143.31
4$128,903.66 $173,687.10 $129,033.20 $174,110.11
5$73,990.70 $99,696.39 $74,110.11 $100,000.00
SUM DEPR $1,500,303.61 SUM DEPR $1,500,000.00
cDDB
BASIS $1,600,000.00 RATE 40.0000%
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0$1,600,000.00 $1,600,000.00
1$640,000.00 $960,000.00 $640,000.00 $960,000.00
3$230,400.00 $345,600.00 $230,400.00 $345,600.00
4$138,240.00 $207,360.00 $138,240.00 $207,360.00
5$82,944.00 $124,416.00 $82,944.00 $124,416.00
SUM DEPR $1,475,584.00 SUM DEPR $1,475,584.00
d DDB-SLN
51
52
53
54
55
56
57
58
59
60
61
62
63
64
A B C D E F
BASIS $1,600,000.00 RATE 40.0000%
EST SALV $100,000.00 USEFUL LIFE 5
RCVD SALV $100,000.00 PERIODS 5
EOY
dtBt
EXC FUNC EXC FUNC
0$1,600,000.00
1$640,000.00 $960,000.00
2$384,000.00 $576,000.00
3$230,400.00 $345,600.00
4$138,240.00 $207,360.00
5$107,360.00 $100,000.00
SUM DEPR $1,500,000.00
1
2
3
4
5
6
7
8
9
10
11
13
14
15
18
19
24
25
26
28
29
30
31
32
33
35
36
41
42
43
44
46
47
48
49
50
A B C D E F
PROBLEM 8.13
a SLN
BASIS $90,000.00
EST SALV $4,000.00 USEFUL LIFE 6
RCVD SALV $4,000.00 PERIODS 6
EOY
dtBt
0$90,000.00
1$14,333.33 $75,666.67
2$14,333.33 $61,333.33
4$14,333.33 $32,666.67
5$14,333.33 $18,333.33
6$14,333.33 $4,000.00
bDB
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0
2$21,687.75 $31,862.25 $21,684.95 $31,879.76
3$12,904.21 $18,958.04 $12,906.09 $18,973.67
4$7,678.01 $11,280.03 $7,681.23 $11,292.43
5$4,568.41 $6,711.62 $4,571.59 $6,720.84
6$2,718.21 $3,993.41 $2,720.84 $4,000.00
cDDB
EOY
dtBtdtBt
EXC FUNC EXC FUNC CALC CALC
0$90,000.00 $90,000.00
1$30,000.00 $60,000.00 $30,000.00 $60,000.00
3$13,333.33 $26,666.67 $13,333.33 $26,666.67
4$8,888.89 $17,777.78 $8,888.89 $17,777.78
5$5,925.93 $11,851.85 $5,925.93 $11,851.85
6$3,950.62 $7,901.23 $3,950.62 $7,901.23
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
A B C D E F
SUM DEPR $82,098.77 SUM DEPR $82,098.77
d DDB-SLN
BASIS $90,000.00 RATE 33.3333%
EST SALV $4,000.00 USEFUL LIFE 6
RCVD SALV $4,000.00 PERIODS 6
EOY
dtBt
EXC FUNC EXC FUNC
0$90,000.00
1$30,000.00 $60,000.00
2$20,000.00 $40,000.00
3$13,333.33 $26,666.67
4$8,888.89 $17,777.78
5$6,888.89 $10,888.89
6$6,888.89 $4,000.00
SUM DEPR $86,000.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
A B C D E F G H I J K L M N O P Q R S T U V
PROBLEM 8.14
a COST BASIS= $35,000+$3,000= $38,000.00
b NET MKT VAL= $2,000-$500= $1,500.00
SLN DB DDB DDB-SLN
BASIS $38,000.00 BASIS $38,000.00 RATE 51.6893% BASIS $38,000.00 RATE 40.0000% BASIS $38,000.00 RATE 40.0000%
EST SALV $1,000.00 USEFUL LIFE 5 EST SALV $1,000.00 USEFUL LIFE 5 EST SALV $1,000.00 USEFUL LIFE 5 EST SALV $1,000.00 USEFUL LIFE 5
RCVD SALV $1,500.00 PERIODS 3 RCVD SALV $1,500.00 PERIODS 3 RCVD SALV $1,500.00 PERIODS 3 RCVD SALV $1,500.00 PERIODS 3
EOY
dtBtEOY dtBtdtBtEOY dtBtdtBtEOY dtBt
EXC FUNC EXC FUNC CALC CALC EXC FUNC EXC FUNC CALC CALC EXC FUNC EXC FUNC
0 $38,000.00 0 0 $38,000.00 $38,000.00 0 $38,000.00
1 $7,400.00 $30,600.00 1 $19,646.00 $18,354.00 $19,641.94 $18,358.06 1 $15,200.00 $22,800.00 $15,200.00 $22,800.00 1 $15,200.00 $22,800.00
2 $7,400.00 $23,200.00 2 $9,489.02 $8,864.98 $9,489.16 $8,868.91 2 $9,120.00 $13,680.00 $9,120.00 $13,680.00 2 $9,120.00 $13,680.00
3 $7,400.00 $15,800.00 3 $4,583.20 $4,281.79 $4,584.28 $4,284.63 3 $5,472.00 $8,208.00 $5,472.00 $8,208.00 3 $5,472.00 $8,208.00
4 $7,400.00 $8,400.00 4 $2,213.68 $2,068.10 $2,214.70 $2,069.94 4 $3,283.20 $4,924.80 $3,283.20 $4,924.80 4 $3,604.00 $4,604.00
5 $7,400.00 $1,000.00 5 $1,069.21 $998.89 $1,069.94 $1,000.00 5 $1,969.92 $2,954.88 $1,969.92 $2,954.88 5 $3,604.00 $1,000.00
SUM DEPR $37,000.00 SUM DEPR $37,001.11 SUM DEPR $37,000.00 SUM DEPR $35,045.12 SUM DEPR $35,045.12 SUM DEPR $37,000.00
c
B3-NMV3= $14,300.00 $2,781.79 $6,708.00 $6,708.00
PROBLEM 8.15
a SLN
BASIS $66,000.00
EST SALV $5,000.00 USEFUL LIFE 12
RCVD SALV $5,000.00 PERIODS 12
EOY
dtBt
0$66,000.00
dtBtdtBt
0$66,000.00 $66,000.00
1$11,000.00 $55,000.00 $11,000.00 $55,000.00
2$9,166.67 $45,833.33 $9,166.67 $45,833.33
3$7,638.89 $38,194.44 $7,638.89 $38,194.44
4$6,365.74 $31,828.70 $6,365.74 $31,828.70
5$5,304.78 $26,523.92 $5,304.78 $26,523.92
6$4,420.65 $22,103.27 $4,420.65 $22,103.27
7$3,683.88 $18,419.39 $3,683.88 $18,419.39
8$3,069.90 $15,349.49 $3,069.90 $15,349.49
9$2,558.25 $12,791.24 $2,558.25 $12,791.24
10 $2,131.87 $10,659.37 $2,131.87 $10,659.37
11 $1,776.56 $8,882.81 $1,776.56 $8,882.81
12 $1,480.47 $7,402.34 $1,480.47 $7,402.34
SUM DEPR $58,597.66 SUM DEPR $58,597.66
d DDB-SLN
BASIS $66,000.00 RATE 16.6667%
EST SALV $5,000.00 USEFUL LIFE 12
RCVD SALV $5,000.00 PERIODS 12
EOY
dtBt
1$11,000.00 $55,000.00
2$9,166.67 $45,833.33
4$6,365.74 $31,828.70
5$5,304.78 $26,523.92
8$3,069.90 $15,349.49
9$2,587.37 $12,762.12
PROBLEM 8.16
a SLN
BASIS $8,000.00
EST SALV $200.00 USEFUL LIFE 6
RCVD SALV $200.00 PERIODS 6
EOY
dtBt
0$8,000.00
1$1,300.00 $6,700.00
2$1,300.00 $5,400.00
3$1,300.00 $4,100.00
4$1,300.00 $2,800.00
6$1,300.00 $200.00
dtBtdtBt
1$3,672.00 $4,328.00 $3,674.07 $4,325.93
2$1,986.55 $2,341.45 $1,986.72 $2,339.21
3$1,074.72 $1,266.72 $1,074.30 $1,264.91
dtBtdtBt
1$2,666.67 $5,333.33 $2,666.67 $5,333.33
2$1,777.78 $3,555.56 $1,777.78 $3,555.56
3$1,185.19 $2,370.37 $1,185.19 $2,370.37
EST SALV $200.00 USEFUL LIFE 6
RCVD SALV $200.00 PERIODS 6
EOY
dtBt
EXC FUNC EXC FUNC
0$8,000.00
1$2,666.67 $5,333.33
2$1,777.78 $3,555.56
3$1,185.19 $2,370.37
4$790.12 $1,580.25
5$690.12 $890.12
6$690.12 $200.00
SUM DEPR $7,800.00
PROBLEM 8.17
a FALSE SLN IS THE MOST COMMONLY USED METHOD IN THE U.S. FOR FINANCIAL REPORTING
b FALSE MODIFIED ACCELERATED COST RECOVERY SYSTEM
c TRUE SEE SECTION 8-4
d TRUE SEE SECTION 8-4
PROBLEM 8.17
a TRUE
b TRUE
c TRUE
d FALSE
MACRS-ADS USES A HALF-MONTH CONVENTION FOR RESIDENTIAL RENTAL AND
NONRESIDENTIAL REAL PROPERTY; HOWEVER, MACRS-ADS USES A HALF-YEAR CONVENTION
FOR MOST PROPERTY. SEE SECTION 8.4.2
WHILE IT IS TRUE THAT MACRS-GDS IS BASED ON DDB SWITHCHING TO SLN, MACRS-GDS
EMPLOYS A HALF-YEAR CONVENTION, BUT DDB DOES NOT. HOWEVER, IN THE U.S., MACRS-GDS
IS REQUIRED FOR INCOME TAX PURPOSES.
THE PROPERTY CLASS ESTABLISHES THE NUMBER OF YEARS, HOWEVER THE NUMBER OF
YEARS DUING WHICH A DEDUCTION OCCURS IS GREATER THAN THE NUMBER IN THE NAME OF
THE PROPERTY CLASS BECAUSE OF THE HALF-YEAR CONVENTION
PROBLEM 8.19
BASIS $30,000.00 MACRS CL 3 5 7 10 15 20
EST SALV $3,000.00 5 YEAR
RCVD SALV $3,000.00 10 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%
2 44.45% 32.00% 24.49% 18.00% 9.50% 7.219%
EOY dt Bt MACRS-GDS 3 14.81% 19.20% 17.49% 14.40% 8.55% 6.677%
4 7.41% 11.52% 12.49% 11.52% 7.70% 6.177%
0 $30,000.00 5 0.00% 11.52% 8.93% 9.22% 6.93% 5.713%
1 $6,000.00 $24,000.00 20.00% 6 0.00% 5.76% 8.92% 7.37% 6.23% 5.285%
2 $9,600.00 $14,400.00 32.00% 7 0.00% 0.00% 8.93% 6.55% 5.90% 4.888%
3 $5,760.00 $8,640.00 19.20% 8 0.00% 0.00% 4.46% 6.55% 5.90% 4.522%
4 $3,456.00 $5,184.00 11.52% 9 0.00% 0.00% 0.00% 6.56% 5.91% 4.462%
5 $3,456.00 $1,728.00 11.52% 10 0.00% 0.00% 0.00% 6.55% 5.90% 4.461%
6 $1,728.00 $0.00 5.76% 11 0.00% 0.00% 0.00% 3.28% 5.91% 4.462%
7 $0.00 $0.00 0.00% 12 5.90% 4.461%
8 $0.00 $0.00 0.00% 13 5.91% 4.462%
9 $0.00 $0.00 0.00% 14 5.90% 4.461%
10 $0.00 $0.00 0.00% 15 5.91% 4.462%
11 $0.00 $0.00 0.00% 16 2.95% 4.461%
17 4.462%
18 4.461%
SUM DEPR $30,000.00 19 4.462%
20 4.461%
21 2.231%
PROPERTY
CLASS
USEFUL
LIFE
PROBLEM 8.20
BASIS $17,000.00 MACRS CL 3 5 7 10 15 20
EST SALV $2,500.00 5 YEAR
RCVD SALV $2,500.00 6 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%
2 44.45% 32.00% 24.49% 18.00% 9.50% 7.219%
EOY dt Bt MACRS-GDS 3 14.81% 19.20% 17.49% 14.40% 8.55% 6.677%
4 7.41% 11.52% 12.49% 11.52% 7.70% 6.177%
0 $17,000.00 5 0.00% 11.52% 8.93% 9.22% 6.93% 5.713%
1 $3,400.00 $13,600.00 20.00% 6 0.00% 5.76% 8.92% 7.37% 6.23% 5.285%
2 $5,440.00 $8,160.00 32.00% 7 0.00% 0.00% 8.93% 6.55% 5.90% 4.888%
3 $3,264.00 $4,896.00 19.20% 8 0.00% 0.00% 4.46% 6.55% 5.90% 4.522%
4 $1,958.40 $2,937.60 11.52% 9 0.00% 0.00% 0.00% 6.56% 5.91% 4.462%
5 $1,958.40 $979.20 11.52% 10 0.00% 0.00% 0.00% 6.55% 5.90% 4.461%
6 $979.20 $0.00 5.76% 11 0.00% 0.00% 0.00% 3.28% 5.91% 4.462%
12 5.90% 4.461%
13 5.91% 4.462%
14 5.90% 4.461%
15 5.91% 4.462%
16 2.95% 4.461%
17 4.462%
18 4.461%
SUM DEPR $17,000.00 19 4.462%
20 4.461%
21 2.231%
PROPERTY
CLASS
USEFUL
LIFE
PROBLEM 8.21
BASIS $66,000.00 MACRS CL 3 5 7 10 15 20
EST SALV $5,000.00 7 YEAR
RCVD SALV $5,000.00 12 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%
2 44.45% 32.00% 24.49% 18.00% 9.50% 7.219%
EOY dt Bt MACRS-GDS 3 14.81% 19.20% 17.49% 14.40% 8.55% 6.677%
4 7.41% 11.52% 12.49% 11.52% 7.70% 6.177%
0 $66,000.00 5 0.00% 11.52% 8.93% 9.22% 6.93% 5.713%
1 $9,431.40 $56,568.60 14.29% 6 0.00% 5.76% 8.92% 7.37% 6.23% 5.285%
2 $16,163.40 $40,405.20 24.49% 7 0.00% 0.00% 8.93% 6.55% 5.90% 4.888%
3 $11,543.40 $28,861.80 17.49% 8 0.00% 0.00% 4.46% 6.55% 5.90% 4.522%
4 $8,243.40 $20,618.40 12.49% 9 0.00% 0.00% 0.00% 6.56% 5.91% 4.462%
5 $5,893.80 $14,724.60 8.93% 10 0.00% 0.00% 0.00% 6.55% 5.90% 4.461%
6 $5,887.20 $8,837.40 8.92% 11 0.00% 0.00% 0.00% 3.28% 5.91% 4.462%
7 $5,893.80 $2,943.60 8.93% 12 5.90% 4.461%
8 $2,943.60 $0.00 4.46% 13 5.91% 4.462%
9 $0.00 $0.00 0.00% 14 5.90% 4.461%
10 $0.00 $0.00 0.00% 15 5.91% 4.462%
11 $0.00 $0.00 0.00% 16 2.95% 4.461%
12 $0.00 $0.00 0.00% 17 4.462%
18 4.461%
SUM DEPR $66,000.00 19 4.462%
20 4.461%
21 2.231%
PROPERTY
CLASS
USEFUL
LIFE
PROBLEM 8.22
BASIS $180,000.00 MACRS CL 3 5 7 10 15 20
EST SALV $5,000.00 10 YEAR
RCVD SALV $5,000.00 12 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%
2 44.45% 32.00% 24.49% 18.00% 9.50% 7.219%
EOY dt Bt MACRS-GDS 3 14.81% 19.20% 17.49% 14.40% 8.55% 6.677%
4 7.41% 11.52% 12.49% 11.52% 7.70% 6.177%
0 $180,000.00 5 0.00% 11.52% 8.93% 9.22% 6.93% 5.713%
1 $18,000.00 $162,000.00 10.00% 6 0.00% 5.76% 8.92% 7.37% 6.23% 5.285%
2 $32,400.00 $129,600.00 18.00% 7 0.00% 0.00% 8.93% 6.55% 5.90% 4.888%
3 $25,920.00 $103,680.00 14.40% 8 0.00% 0.00% 4.46% 6.55% 5.90% 4.522%
4 $20,736.00 $82,944.00 11.52% 9 0.00% 0.00% 0.00% 6.56% 5.91% 4.462%
5 $8,298.00 $74,646.00 4.61% 10 0.00% 0.00% 0.00% 6.55% 5.90% 4.461%
11 0.00% 0.00% 0.00% 3.28% 5.91% 4.462%
12 5.90% 4.461%
13 5.91% 4.462%
14 5.90% 4.461%
15 5.91% 4.462%
16 2.95% 4.461%
17 4.462%
18 4.461%
SUM DEPR $105,354.00 19 4.462%
20 4.461%
21 2.231%
PROPERTY
CLASS
USEFUL
LIFE