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    Asset Book Value After 2 Years

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    Bet'r Bilt Toys just purchased some MACRS 5-year property at a cost of $230,000. Which of the following will correctly give you the book value of this equipment at the end of year 2?

    MACRS 5-Year property
    Year Rate

    1 20.00%
    2 32.00%
    3 19.20%
    4 11.52%
    5 11.52%
    6 5.76%

    (I) 52% of the asset cost
    (II) 48% of the asset cost
    (III) 68% of 80% of the asset cost
    (IV) the asset cost, minus 20% of the asset cost, minus 32% of 80% of the asset cost

    1. II only
    2. III and IV only
    3. I and III only
    4. II and IV only
    5. I, II, III, and IV

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    Solution Summary

    This solution identifies the correct asset cost for the book value of the equipment, and justifies why.