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Freedom Corporation acquired a fixed asset for $150,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 10% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C, TABLE 1 and Appendix C, TABLE 2) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.

Freedom Corporation acquired a fixed asset for $150,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 10% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C, TABLE 1 and Appendix C, TABLE 2) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.

FINANCIAL ACCOUNTING
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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2 Freedom Corporation acquired a fixed asset for $150,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 10% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C. TABLE 1 and Appendix C, TABLE 2.) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years- digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Incremental PV of tax savings using SYD depreciation Required 1 76,839 Required 2
Transcribed Image Text:2 Freedom Corporation acquired a fixed asset for $150,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 10% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C. TABLE 1 and Appendix C, TABLE 2.) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years- digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Incremental PV of tax savings using SYD depreciation Required 1 76,839 Required 2
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