A package delivery truck with a five-year MACRS class purchased at $80,000. It was purchased and placed in service on January 5, 2020. The applicable salvage values would be $40,000 in 2021, $10,000 2023, and $2,000 in 2027.) Compute the gain or loss amounts when the asset is disposed of in: 2021
2023
2027

gain if sold at the end of 2021 = $1,600

loss if sold at the end of 2023 = -$3,824

gain if sold at the end of 2027 = $2,000

Explanation:

MACRS half year convention depreciation rate for 5 year recovery period

year             depreciation %     depreciation expense        book value

0                                                                                               $80,000

2020                   20%                       $16,000                         $64,000              

2021                    32%                       $25,600                        $38,400

2022                   19.20%                   $15,360                        $23,040

2023                   11.52%                    $9,216                          $13,824

2024                   11.52%                    $9,216                          $4,608

2025                   5.76%                     $4,608                         $0

gain if sold at the end of 2021 = $40,000 - $38,400 = $1,600

loss if sold at the end of 2023 = $10,000 - $13,824 = -$3,824

gain if sold at the end of 2027 = $2,000

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