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Asset Book Value After 2 Years

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

Solution Summary

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