Exhibit 11-05 Wilson Is Preparing His Tax Returns Using the MACRS Convention

question 97

Multiple Choice

Exhibit 11-05
Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, Year 1.
MACRS Depreciation as a Percentage of the Cost of the Asset
-Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 3?

• A) $12,096
• B) $21,000
• C) $33,600
• D) $20,160

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Definitions:

Average Total Costs

The total expenses incurred in the process of producing or offering a good or service, divided by the quantity of goods or services produced or offered.

Average Variable Costs

The sum of all variable production costs divided by the total number of units produced.

Output

The amount of something produced by a person, machine, or industry.

Average Cost

The total cost divided by the quantity produced, measuring how much on average each unit of output costs to produce.