An engineering firm spent $40,000 3 years ago to purchase and install new comput
ID: 2471833 • Letter: A
Question
An engineering firm spent $40,000 3 years ago to purchase and install new computer equipment in its office. The computer equipment has a class life (ADR) of 6 years, so is considered to be 5-year property using MACRS-GDS depreication. The company sold the used equipment after 3 years of use to a refurbisher for $820. Determine the depreciation recapture or loss the firm should record for selling the equipment. Express depreciation recapture as a positive number or loss as a negative number in $ to the nearest $10.
Explanation / Answer
Three years depreciation = 20 + 32 + 19.20 = 71.20%
Total depreciation = 40000 * 0.7120 = 28480
Asset price after three years = 40000 - 28480 = 11520
Loss on asset = 11520 - 820 = 10700