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1 2013 problem 5 a manufacturer of aerospace products

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Unformatted text preview: turer of aerospace products purchased three flexible assembly cells for $600,000 each. Delivery and insurance charges were $40,000, and installation of the cells cost another $50,000. (Hint: For Part b, please refers to Table 7.2 MACRS Class Lives and Recovery Periods. For Part c, use 7 years GDS Recovery Rates) a. Determine the cost basis of the three cells. Solution: Three flexible assembly cells = 3($600,000) = $1,800,000 Delivery and insurance charges = $40,000 Installation of the cells = $50,000 b. What is the class life of the cells? Solution: From table 7-2 on page 298, you can find that the class life for Manufacture of aerospace products (asset class = 37.2) is 10 years. c. What is the MACRS depreciation in year five? Solution: From table 7-2 on page 298, the GDS recovery period is seven years. GDS recovery rates (rk) can be found on page 300. From table 7-3, GDS recover rates, 0.0893, can be obtained. d. If the cells are sold to another company for $120,000 each at the end of year six, how much is the recaptured depreciation? Solution: There’s an early...
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