P. A. Petroleum just purchased some equipment at a cost of $67,000. The equipment is classified as MACRS five-year property. The MACRS rates are. 2,.32, and. 192 for Years 1 to 3, respectively. What is the proper methodology for computing the depreciation expense for Year 2 assuming the firm opts to forego any bonus depreciation?

The proper methodology for computing the depreciation expense for Year 2 assuming the firm opts to forego any bonus depreciation is $67,000*0.32

Explanation:

The depreciation expense shall be calculated by multiplying the cost basis of the asset with the depreciation rate for the respective years

The Cost of the Equipment = $60,000

The MACRS rate for Year 2 = 0.32

Depreciation for Year 2

= Cost basis of the asset*Depreciation rate for year 2

= $67,000*0.32

Therefore, The proper methodology for computing the depreciation expense for Year 2 assuming the firm opts to forego any bonus depreciation is $67,000*0.32