9. The federal government allows an income tax deduction for the decrease in value of certain capital assets such as automobiles, equipment and buildings. There are usually two different ways to calculate the depreciation: Fixed Amount Depreciation, where you deduct a fixed amount for the expected life of an asset, and Fixed Percentage Depreciation, where you deduct a fixed percentage for the expected life of an asset. Your company just bought a truck for $54,250. Assume it would last 10 years. (a) Draw one graph showing the truck value with the two methods of depreciation: the fixed amount depreciation with $5000 per year and the fixed percentage de- preciation with 15% per year. What do you discover from the graph? (b) At approximately what time would the truck has the same residual value. (c) At what percentage of depreciation the truck would have the same residual value at the end of 10th year.

9. The federal government allows an income tax deduction for the decrease in value of certain capital assets such as automobiles, equipment and buildings. There are usually two different ways to calculate the depreciation: Fixed Amount Depreciation, where you deduct a fixed amount for the expected life of an asset, and Fixed Percentage Depreciation, where you deduct a fixed percentage for the expected life of an asset. Your company just bought a truck for $54,250. Assume it would last 10 years. (a) Draw one graph showing the truck value with the two methods of depreciation: the fixed amount depreciation with $5000 per year and the fixed percentage de- preciation with 15% per year. What do you discover from the graph? (b) At approximately what time would the truck has the same residual value. (c) At what percentage of depreciation the truck would have the same residual value at the end of 10th year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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3) ( Below table shows the calculations for an after-tax analysis of a machine purchase alternative. EOY ВТСР Depreciation Deduction Тахable Income АТCF Income Таxes - 20,000 16,000 16,000 16,000 16,000 16,000 18,000 3,000 3,000 3,000 3,000 3,000 3,000 13,000 13,000 13,000 13,000 13,000 15,000 - 6,500 - 6,500 - 6,500 - 6,500 - 6,500 - 7,500 - 20,000 9,500 9,500 9,500 9,500 9,500 1 3 4 6. 10,500 a) Find answers to the below questions What are the cost basis (price) and "annual revenues less expenses"? What is the terminal market value (or salvage value)? What is the income tax rate? i. ii. iii. iv. What is the method used for depreciation deduction? What is the book value at the end of useful life? V. b) Calculate the equivalent present worth (PW) and the equivalent annual worth (AW) at an after-tax MARR of 11%.
______21. The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. ____ 22. An estimate of the amount which an asset can be sold at the end of its useful life is called residual value. ____ 23. Federal unemployment taxes are paid by the employer and the employee. ____ 24. When minor errors occur in the estimates used in the determination of depreciation, the amounts recorded for depreciation expense in the past should be corrected. ____ 25. Residual value is not relevant when calculating the annual depreciation expense using the double declining-balance method (do not consider the calculation for the final year). True and False questions
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Troy Industries purchased a new machine 3 year(s) ago for $80,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule.. Assume 21% ordinary and capital gains tax rates. What is the book value of the machine? b. Calculate the firm's tax liability for each case if it sold the machine for each of the following amounts: $ 100,000, 56,000 , 23,200 and $ 15,000
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Several years ago, Western Electric Corp. purchased equipment for $20 million. Western uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At Dec. 31, 2020 the carrying value of the equipment was $18 million and its tax basis was $15 million. At Dec.31, 2021 the carrying value of the equipment was $16 million and the tax basis was $11 million. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25 million. A tax rate of 25% applies to all years. Required: Prepare one journal entry to record Western's income tax expense for the current year. Show well-labeled computations for the income tax payable and the change in the deferred tax account.