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Question: Depreciation Tax Shield: Wong, Pemberton, and Janakowski, LLP, recently purchased a new facility to house the partnership's accounting firm. The facility cost $460,000. The partnership will depreciate the facility by recording $46,000 of depreciation expense each year for 10 years. Wong, Pemberton, and Janakowski, LLP, expects that its tax rate will be 30 percent in the coming year. Required: What is the tax savings (that is, the depreciation tax shield) associated with the new facility in the coming year?

Question: Depreciation Tax Shield: Wong, Pemberton, and Janakowski, LLP, recently purchased a new facility to house the partnership's accounting firm. The facility cost $460,000. The partnership will depreciate the facility by recording $46,000 of depreciation expense each year for 10 years. Wong, Pemberton, and Janakowski, LLP, expects that its tax rate will be 30 percent in the coming year. Required: What is the tax savings (that is, the depreciation tax shield) associated with the new facility in the coming year?

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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Question: Depreciation Tax Shield: Wong, Pemberton, and Janakowski, LLP, recently purchased a new facility to house the partnership's accounting firm. The facility cost $460,000. The partnership will depreciate the facility by recording $46,000 of depreciation expense each year for 10 years. Wong, Pemberton, and Janakowski, LLP, expects that its tax rate will be 30 percent in the coming year. Required: What is the tax savings (that is, the depreciation tax shield) associated with the new facility in the coming year?
Transcribed Image Text:Question: Depreciation Tax Shield: Wong, Pemberton, and Janakowski, LLP, recently purchased a new facility to house the partnership's accounting firm. The facility cost $460,000. The partnership will depreciate the facility by recording $46,000 of depreciation expense each year for 10 years. Wong, Pemberton, and Janakowski, LLP, expects that its tax rate will be 30 percent in the coming year. Required: What is the tax savings (that is, the depreciation tax shield) associated with the new facility in the coming year?
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