To keep track of customers' behavior, a grocery store chain invests $75,000 in a CRM system. This new system is treated as a seven-year MARCS property for tax purposes. The system's life-span is six years, and at the end of the six years, the expected salvage value is $5,500. (i) What is the depreciation allowance for the forth year of use? (ii) What is the depreciation allowance for the sixth year of use? A) (i) $9,367.5, (ii)$3,345.0 B) (i) $9,367.5, (ii)$6,690.0 C) (i) $8,680.6, (ii)$3,099.7 D) Answers A, B and C are not correct

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Your company is contemplating the purchase of a large stamping machine. The machine will cost $167,000. With additional transportation and installation costs of $5,000 and $11,000, respectively, the cost basis for depreciation purposes is $183,000. Its MV at the end of five years is estimated as $34,000. The IRS has assured you that this machine will fall under a three year MACRS class life category. The justifications for this machine include $45,000 savings per year in labor and $29,000 savings per year in reduced materials. The before-tax MARR is 24% per year, and the effective income tax rate is 28%. Assume the stamping machine will be used for only three years, owing to the company's losing several government contracts. The MV at the end of year three is $47,000. What is the income tax owed at the end of year three owing to depreciation recapture (capital gain)? E Click the icon to view the GDS Recovery Rates (rg) for the 3-year property class. Choose the correct answer below. O…

A company purchases new cement manufacturing assets that cost $15 million. This is classified in the 15-year property class using MACRS-GDS. What would be the depreciation allowance and book value at the end of years 1 and 3 using MARS with 50% bonus depreciation? a) Depreciation allowance at the end of year 1: b) Book value at the end of year 3 c)Depreciation allowance at the end of year 1: d) Book value at the end of year 3

Your business buys a desk for $3,000.  You figure the desk will be useful for 10 years and have a value of $500 at the end of the 10-year period.  For financial accounting purposes, what is the asset’s depreciable basis?

Tory Enterprises pays $254,400 for equipment that will last five years and have a $45,200 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,100 annually, after deducting all expenses except depreciation.   Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming straight-line depreciation is used.

Suppose that you are asked to derive the depreciation rate for a house on rural property. The contributory value of the house is $50,000, the replacement cost is estimated to be $80,000, and its effective age is 10 years. Calculate the annual percentage depreciation for this house.     3%     3.75%     4%     4.75%

An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $202,600 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection Title search Renovation Landscaping Loan interest Insurance Property taxes Selling expenses Required: $ 539 1,078 13,000 878 7,239 1,839 6,039 8,000 a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,980 per month. However, he would have to make an additional $7,980 in interest payments on his loan during that time, and then sell. What would the…