Equipment associated with manufacturing small railcars had a first cost of $190000 with an expected salvage value of $30,000 at theend of its 5-year life. The revenue was $642000 in year 2, with operating expenses of $98,000. If the company's effective tax rate was31.00%, what would be the difference in taxes paid in year 2 if the depreciation method were straight line instead of ModifiedAccelerated Cost Recovery System (MACRS)? The MACRS depreciation rate for year 2 is 32%.The difference in taxes paid is determined to be $

The objective of the question is to calculate the difference in taxes paid in year 2 if the…

Answered: Equipment associated with manufacturing…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Savant Properties in Knoxville, TN built a shopping center at a cost $50M in year 2010. The company started leasing space in July of 2010. Assuming the land was purchased for $5M; determine the depreciation charges through 2013 if the property was sold in November 2013.
Under the General Depreciation System (GDS) of asset classification, any asset that is not in a stated class is automatically assigned a recovery period of: (a) 5 years (b) 7 years (c) 10 years (d) 15 years
On its tax return at the end of the current year Webnet Inc. has $6 million of tax depreciation in excess of depreciation in its income statement. A disclosure note reveals that $1 million of the $6 million difference will reverse itself next year, and the remainder will reverse over the next 4 years. In the absence of other temporary differences, in the balance sheet at the end of the current year Webnet would report ?
How does the tax depreciation method allow the firms to benefit from the tax advantages of depreciating assets more quickly?
A piece of equipment will be DDB depreciated over an expected life of 12 years. There is a first cost of $25,000 and an estimated salvage of $2500. The depreciation charge for year 1 is: Less than $4000 O Between $4000-$4200 Between $4200-$4400 O Higher than $4400
Company RLM purchased a machine that cost $60,000 and will last 6 years.A salvage value was not assigned to the asset. Determine the annual depreciationexpense using the straight-line method.
A cost of machine is P1,400,000 with a salvage value of P10,000 after 8 years. Determine the total depreciation after the 4th year using DBM.
A robot used in simulated car crashes cost $70,000, has no salvage value, and has an expected capacity of tests not to exceed 10,000 according to the manufacturer. Volvo Motors decided to use the unit-of-production depreciation method because the number of test crashes per year in which the robot would be involved was not estimable. Determine the annual depreciation and book value for the first 3 years if the number of tests were 3810, 2720, and 5390 per year.
A machine was bought 3 years ago for $20,000. SL depreciation has been used with B=$20,000, N=4years, S=$0. A replacement is been considered. A new machine can be bought for $16,000 to replace the old one. DDB depreciation will be used for the new machine with B=$16,000, N=4 years, S=$0. The new machine will be used for 2 years and then can be sold for $12,000. The new machine will save $5,000/yr in operation cost. The old machine can be sold for $4,000 right now, or kept in use for 2 more years and then will be sold for $1,000. Incremental combined tax rate is 50%, after-tax MARR is 10%. Calculate ∆PW of the replacement.
What is the depreciation of equipment purchased at 3 years ago for $64,405 if it is depreciated using the sum of the year's digits (SOYD) method? The expected life is 15. year.
Your self-employed friend tells you that he is able to legally use depreciation write-off on his income tax return for his car, since he uses it part time in his business travel. He said the car is book depreciated over a 4-year period by the SL method and after 3 years it has BV3 = $62,000 with an annual depreciation of $19,000. Determine the first cost of the car. Determine what he assumed to be the trade-in value after 4 years.
You must evaluate the purchase of a spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 4 year class and would be sold after 4 years for $60,000. The applicable depreciation rates are 33%, 45%, 15% and 7%. The equipment would require an $8000 increase in net operating working capital. The project would have no effect on revenues, but it should save the firm $50,000 per year before-tax labour costs. The firm's marginal federal-plus state tax rate is 40%. QUESTION:W Whatare the project's annual cash flows in Years 1, 2,3 and 4?

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