Sharpe Machining Company purchased industrial tools costing $100,000, which fall in the 3-year property class under MACRS. Use Appendix A and Exhibit 16-9 for your reference. Note: Use appropriate factor(s) from the tables provided. Required: 1. Prepare a schedule of depreciation deductions assuming: a. The firm uses the accelerated depreciation schedule specified by MẶCRS. b. The firm uses the optional straight-line depreciation method and the half-year convention. 2. Calculate the present value of the depreciation tax shield under each depreciation method listed in requirement 1. Sharpe Machining Company's after-tax hurdle rate is 12 percent, and the firm's tax rate is 30 percent. Complete this question by entering your answers in the tabs below. Reg 1A Req 18 Reg 2 Calculate the present value of the depreciation tax shield under each depreciation method listed in requirement 1. Sharpe. Machining Company's after-tax hurdle rate is 12 percent, and the firm's tax rate is 30 percent. Note: Round your final answers to the nearest dollar amount. Under MACRS Accelerated depreciation Under MACRS Straight-line depreciation Present Value of Depreciation Tax Shield $ S < 10 36,184 37,290 < Prev Next > Che

Sharpe Machining Company purchased industrial tools costing $100,000, which fall in the 3-year property class under MACRS. Use Appendix A and Exhibit 16-9 for your reference. Note: Use appropriate factor(s) from the tables provided. Required: 1. Prepare a schedule of depreciation deductions assuming: a. The firm uses the accelerated depreciation schedule specified by MẶCRS. b. The firm uses the optional straight-line depreciation method and the half-year convention. 2. Calculate the present value of the depreciation tax shield under each depreciation method listed in requirement 1. Sharpe Machining Company's after-tax hurdle rate is 12 percent, and the firm's tax rate is 30 percent. Complete this question by entering your answers in the tabs below. Reg 1A Req 18 Reg 2 Calculate the present value of the depreciation tax shield under each depreciation method listed in requirement 1. Sharpe. Machining Company's after-tax hurdle rate is 12 percent, and the firm's tax rate is 30 percent. Note: Round your final answers to the nearest dollar amount. Under MACRS Accelerated depreciation Under MACRS Straight-line depreciation Present Value of Depreciation Tax Shield $ S < 10 36,184 37,290 < Prev Next > Che

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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A financial analyst is studying the income statement eff ect of two alternative depreciationmethods for a recently acquired piece of equipment. She gathers the following information about the equipment’s expected production life and use:Year 1 Year 2 Year 3 Year 4 Year 5 TotalUnits of production 2,000 2,000 2,000 2,000 2,500 10,500Compared with the units-of-production method of depreciation, if the company uses thestraight-line method to depreciate the equipment, its net income in Year 1 will most likely be:A. lower.B. higher.C. the same
Keller Industries uses the straight-line depreciation method. One asset had been purchased for $6,000. Annual depreciation expense was $600. after considering residual value of $1,000. What was the approximate life of the asset? a. 5.0 years b. 8.3 years c. 9.5 years d. 10.2 years
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[The following information applies to the questions displayed below.] Abbott Landscaping purchased a tractor at a cost of $25,000 and sold it three years later for $13,400. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $3,500 residual value. Tractors are included in the Equipment account. Exercise 7-17A Part 1 Required: 1. Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Next > search Designed by Apole in Cafomia Assembled in Chna
Loban Company purchased, on January 1 for cash, four cars for $9,000 each and expects that they will be sold in 3 years for $1,500 each. The company uses group depreciation on a straight-line basis. Required: 1. Prepare journal entries to record the acquisition and the first year’s depreciation expense. 2. If one of the cars is sold at the beginning of the second year for $7,000, what journal entry is required?
Murphy Limited purchased a $30,000 asset with a five‐year life expectancy and no salvage value. Two alternative methods of calculating depreciation expense are presented below.Method A Method BYear1 $3,000 $6,0002 6,000 9,6003 ? ?Required:1. Identify the method of depreciation and compute the depreciation expense for the third year under each method.2. The chief financial officer of Murphy considers depreciation to be nothing more than an arbitrary calculation, based on unreliable estimates. She proposes to use method B for years 1 and 2 and method A for years 3, 4, and 5. In this way, she can deduct the maximum depreciation each year over the life of the asset. Is her proposal acceptable? Why or why not?3. What factors should be considered in choosing a method ofdepreciation?
Morey, Inc., has the following plant asset accounts: Land, Buildings, and Equipment, with a separate accumulated depreciation account for each of these except Land. Morey completed the following transactions: Jan 4 Traded in equipment with accumlated depreciation of $64,000 (cost of $134,000) for similar new equipment with a cash cost of $175,000. Recieved a trade-in allowance of $72,000 on the old equipment and paid $103,000 in cash. Jan 29 Sold a building that had a cost of $650,000 and had accumulated depreciationof $140,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $220,000. Morey received $125,000 cash and a $379,625 note receivable. Oct 30 Purchased land and a building for a single price of $360,000 cash. An independent appraisal valued the land at $160,800 and the building at $241,200. Dec 31 Recorded depreciation as follows: Equipment has an expected…
Solar Systems purchased two assets during the current year. On August 10, Solar Systems placed in service computer equipment (five year property) with a basis of $20,000 and on November 18 placed in service machinery (seven-year property) with a basis of $10,000. Calculate the maximum depreciation expense, ignoring Sect. 179 and bonus depreciation). Use your book's table 1. Type of asset Date in service Recovery period Cost basis Depreciation rate Depreciation expense Adjusted tax basis Year Computer equipment 8/10/Y1 5 year 20,000 Y1 Machinery 11/18/Y1 7 year 10,000 Y1
A. CALCULATE the amount, if any, of recapture of depreciation, ordinary loss or capital gain on the disposal of an asset that was sold at the end of year 1 for $ 18,000. The machine was originally purchased at a cost of $ 20,000 and was depreciated using the MACRS method for a 5 year property class. B. INDICATE if there was recapture of depreciation (D), ordinary loss (P) or capital gain (G) in the disposal of this asset. [fill these blanks] * Amount = $. ___- * Type of disposition: