North Ltd. purchased a building in 20X5 for $1,200,000. Straight-line depreciation was used, with a useful life of 40 years and aresidual value of $200,000. A full year of depreciation was charged in 20X5.In 2008, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 30%.Required:1. Assume this is a change in estimate, and calculate 20X8 depreciation expense.Depreciation expense$112,5002. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8opening retained earnings.Depreciation expense$ 240,000

The objective of the question is to calculate the depreciation expense for the year 2008 under two…

Answered: North Ltd. purchased a building in 20X5…

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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On Jan. 2, 2014, Sirap Co. bought a mounding machine for $400,000. The machine has an 8-year useful life with Zero residual value. The company used the Straight-Line Depreciation method. On Jan. 2, 2017, the company changed to the Double Declining Balance depreciation method. Compute depreciation expense that should be taken for 2017. Ignore all income tax considerations.
Aa.2
A division of Raytheon owns a 5-year-old turret lathe used to manufacture fabricated metal products that was purchased for $96,000 and now has a financial reporting (non-tax) book value of $24,000. It has been depreciated for tax purposes as MACRS-GDS 7-year property. It has a current market value of $18,000. The expected decline in market value is $3,000 per year from this point forward to a minimum of $3,000. O&M costs are $8,000 per year. Additional capability is needed. If the old lathe is kept, that new capability will be contracted out for $13,000, assumed payable at the end of each year. A new turret lathe has the increased capability to fulfill all needs, replacing the existing turret lathe and requiring no outside contracting. It can be purchased for $65,000 and will have an expected life of 8 years. Its market value is expected to be $65,000(0.7t)at the end of year t. Annual O&M costs are expected to equal $10,000. If the after-tax MARR is 9 percent, the tax rate is…
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
Kenartha Oil recently paid $477,900 for equipment that will last five years and have a residual value of $110,000. By using the machine in its operations for five years, the company expects to earn $176,000 annually, after deducting all expenses except depreciation. Complete the schedule below assuming each of (a) straight-line depreciation and (b) double-declining-balance depreciation. (Do not round intermediate calculations. Enter loss amounts with a minus sign.) (a) Straight-Line Depreciation: Profit before depreciation Depreciation expenses Profit (loss) (b) Double-Declining-Balance Depreciation: Profit before depreciation Depreciation expenses Profit (loss) Year 1 Year 1 Year 2 Year 2 Year 3 Year 3 Year 4 Year 4 Year 5 Year 5 5-Year Totals 5-Year Totals
North Ltd. purchased a building in 20X5 for $1,450,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $470,000. A full year of depreciation was charged in 20X5. In 20X8, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 20%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $ 137,650 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense Cumulative effect
For specialized devices for use with its latest GPS / GIS system, Freeman Engineering charged $28,500. Using MACRS depreciation, the equipment was depreciated over a 3 year recovery period. After 2 years, the company sold the equipment for $5000 when it bought an improved system. (a) Assess the value of the recapture of depreciation or the capital loss involved in the asset sale. (b) What tax impact is that number going to have?
Infinity Production acquired a new machine at the beginning of the current year. The machine cost $900,000 with no residual value expected. Infinity uses the straight-line method for financial reporting, assuming a 6-year useful life. The firm classifies the equipment as 5-year MACRS property for tax purposes using the following percentages. Year MACRS (%) 1 20.00% 2 32.00 3 19.20 4 11.52 5 11.52 6 5.76 The company is subject to a 20% income tax rate and has no other book-tax differences. Income before depreciation and tax is presented below: Year Income before Tax and Depreciation 1 $450,000 2 500,000 3 570,000 4 700,000 5 820,000 6 950,000 What is Infinity's deferred tax asset or deferred tax liability at the end of year 3? Group of answer choices $38,160 deferred tax liability $2760 deferred tax liability $2760 deferred tax asset $38,160 deferred tax asset PreviousNext

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