a)
Case summary:
Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.
To determine: The annual depreciation using MACR.
b)
To determine: The assumption when asset bought within the year.
Want to see the full answer?
Check out a sample textbook solutionChapter 11 Solutions
Foundations Of Finance
- A 7 year property class was purchased for $115,000. The owner took depreciation charges using MACRS each year. The asset was sold at a market value of $122,200 at the end of the 3rd year. The recaptured depreciation is most nearly: i. $115,000 ii. $79,074 iii. $64,710 iv. $50,290 v. $44,6000 vi. $20,113 viii. $7,000 ix. $0 Please use excel and show formulas.arrow_forwardA 7 year property class asset was purchased for $115,000. The owner took depreciation charges using MACRS each year. The asset was sold at a market value of $122,200 at the end of the third year. The book value at the end of the third year? i. $70,400 ii. $65,087 iii. $50,290 iv. $43,446 v. $35,900 Please use excel and show formulas.arrow_forwardConsider a five-year MACRS asset purchasedat $80,000. (Note that a five-year MACRS propertyclass is depreciated over six years due to the half-yearconvention. The applicable salvage values would be$40,000 in year 3, $30,000 in year 5, and $10,000 inyear 6.) Compute the gain or loss amounts when theasset is disposed of in(a) Year 3.(b) Year 5.(c) Year 6arrow_forward
- 1. Lloyd Company purchased a depreciable asset for P1,360,000. The estimated salvage value is P360,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? * Choices: 125000 170000 187000 255000arrow_forward1. ABC Corporation purchased a new computer system for $56,000 in 2000. The computer is classified as a seven- year property. What is the depreciation allowance for each year if: a. Straight-line depreciation method is used?arrow_forwardWendt Corporation acquired a new depreciable asset for $94,000. The asset has a 4-year expected life and a residual value of zero. Required: Question Content Area 1. Prepare a depreciation schedule for all 4 years of the asset's expected life using the straight-line depreciation method. If an amount is zero, enter "0". Wendt CorporationStraight-Line Depreciation MethodFour Years End of Year Depreciation Expense Accumulated Depreciation Book Value $fill in the blank 6b806f009f9ffea_1 Year 1 $fill in the blank 6b806f009f9ffea_2 $fill in the blank 6b806f009f9ffea_3 fill in the blank 6b806f009f9ffea_4 Year 2 fill in the blank 6b806f009f9ffea_5 fill in the blank 6b806f009f9ffea_6 fill in the blank 6b806f009f9ffea_7 Year 3 fill in the blank 6b806f009f9ffea_8 fill in the blank 6b806f009f9ffea_9 fill in the blank 6b806f009f9ffea_10 Year 4 fill in the blank 6b806f009f9ffea_11 fill in the blank 6b806f009f9ffea_12 fill in the blank 6b806f009f9ffea_13…arrow_forward
- An asset owned by PT X has the following information: initial cost = $10,000, depreciation life = 5 years, and S (salvage value) = 0. Use the SL and Te = 48% methods to tabulate CFAT. Gross income minus expenses is $5000 per year. The asset has a salvage value at year 6 of $3075. Assume income and expenses have the same value up to one year after the end of their depreciation period.arrow_forwardA tractor for over-the-road hauling is purchased for $90,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $4,000. Calculate the depreciation deduction and the unrecovered investment during each year of the tractor's life using MACRS-GDS allowances. a. What is the MACRS-GDS property class? ANSWER b. Assume the tractor is used for the full 6 years ANSWER of use. c. Assume the tractor is sold during the 4th year ANSWER d. Assume the tractor is sold during the 3rd year of use.arrow_forward> Equipment was acquired at the beginning of the year at a cost of $77,880. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500. a. What was the depreciation expense for the first year? b. Assuming the equipment was sold at the end of the second year for $58,800, determine the gain or loss on the sale of the equipment. c. Journalize the entry for the sale. If an amount box does not require an entry, leave it blank. ?arrow_forward
- At the beginning of the year, Patrick Company acquired a computer to be used in its operations. The computer was delivered by the supplier, installed by Patrick, and placed into operation. The estimated useful life of the computer is five years, and its estimated residual value is significant. Required: 1. a. What costs should Patrick capitalize for the computer? b. What is the objective of depreciation accounting? 2. What is the rationale for using accelerated depreciation methods?arrow_forwardA piece of construction equipment (asset class 15.0) was purchased by the Jones Construction Company. The cost basis was $300,000. Solve, a. Determine the GDS and ADS depreciation deductions for this property. b. Compute the difference in PW of the two sets of depreciation deductions in Part (a) if i = 12% per year.arrow_forwardA tractor for over-the-road hauling is purchased for $90,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $4,000. Calculate the depreciation deduction and the unrecovered investment during each year of the tractor’s life using MACRS-GDS allowances. a. What is the MACRS-GDS property class? b. Assume the tractor is used for the full 6 years. c. Assume the tractor is sold during the 4th year of use. d. Assume the tractor is sold during the 3rd year of use.arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College