The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation . Given: Purchased computer equipment for $31,000. Equipment has a useful life of 10 years with a salvage value of $1,000. The MACRS class life is 5 years for tax purposes. (a) To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

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Answer 1

Question

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

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KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors.

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Answer 2

Question

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

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Answer 3

Question

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

Answer 6

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

Answer 7

Chapter 11, Problem 26E

To determine

Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.

Given:

Purchased computer equipment for $31,000.

Equipment has a useful life of 10 years with a salvage value of $1,000.

The MACRS class life is 5 years for tax purposes.

(a)

To determine the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the straight-line method for book purposes and tax purposes.

Answer 8

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

Answer 9

To determine

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

Answer 10

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

Answer 11

To determine

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 11 - Prob. 1Q Ch. 11 - 2. Identify the factors that are relevant in...Ch. 11 - Prob. 3Q Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - Prob. 6Q Ch. 11 - 7. What basic questions must be answered before...Ch. 11 - Prob. 8Q Ch. 11 - Prob. 9Q Ch. 11 - 10. What are the major factors considered in...

(b) To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

(c) To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.

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Chapter 11 Solutions

(b)

To determine what is the depreciation expense reported in (1) the financial statements for 2017 and (2) the tax return for 2017, assuming that the company uses the double-declining-balance method for both book and tax purposes.

(c)

To explain: To explain why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both.