A Firm Is Considering Purchasing an Asset That Will Cost

question 96

Multiple Choice

A firm is considering purchasing an asset that will cost $1 million.Other depreciable costs include $100,000 in installation costs.If the asset is classified in the 3-year class,what is the annual depreciation for each year for this asset using the fixed depreciation percentages given by MACRS? (The percentages are 33.33%,44.45%,14.81%,and 7.41%,respectively.)

• A)$366,667,$366,667,$366,667 and $0 for years 1,2,3,and 4,respectively
• B)$275,000,$275,000,$275,000,and $275,000 for years 1,2,3,and 4,respectively
• C)$366,630,$488,950,$162,910,and $81,510 for years 1,2,3,and 4,respectively
• D)$366,630,$488,950,$81,510,and $81,510 for years 1,2,3,and 4,respectively

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Definitions:

Annual Investment

The amount of money that is invested or planned to be invested over the course of a year.

Investments

The action or process of investing money for profit, including assets such as stocks, bonds, real estate, or commodities.

Compounded Annually

Interest calculation method where the interest is added to the principal at the end of each year, affecting the next year's interest.

Initial Payment

The first payment made in a series of payments for the purchase of an item or service.