
Concept Introduction:
This is one of the methods to calculate the depreciation on assets. Under this method the
Requirement-1:
To Calculate:
The Net Income for each year using the Straight Line Method

Answer to Problem 7.3.2C
The Net income for each year using the Straight Line Method is as follows:
Year | Net income |
20Y2 | $ 222,000 |
20Y3 | $ 444,000 |
20Y4 | $ 444,000 |
20Y5 | $ 444,000 |
20Y6 | $ 444,000 |
20Y7 | $ 462,000 |
Explanation of Solution
The Net Income for each year using the Straight Line Method is calculated as follows:
Year | Income before Depreciation and Tax | Depreciation | Income before Tax | Income Tax | Net income |
A | B | C =A-B | D=C*40% | E=C-D | |
20Y2 | $ 400,000 | $ 30,000 | $ 370,000 | $148,000 | $ 222,000 |
20Y3 | $ 800,000 | $ 60,000 | $ 740,000 | $296,000 | $ 444,000 |
20Y4 | $ 800,000 | $ 60,000 | $ 740,000 | $296,000 | $ 444,000 |
20Y5 | $ 800,000 | $ 60,000 | $ 740,000 | $296,000 | $ 444,000 |
20Y6 | $ 800,000 | $ 60,000 | $ 740,000 | $296,000 | $ 444,000 |
20Y7 | $ 800,000 | $ 30,000 | $ 770,000 | $308,000 | $ 462,000 |
Concept Introduction:
Straight line method of depreciation:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Requirement-1:
To Calculate:
The Net Income for each year using the MCRS Method
Year | Net income |
20Y2 | $ 222,000 |
20Y3 | $ 422,400 |
20Y4 | $ 445,440 |
20Y5 | $ 459,264 |
20Y6 | $ 459,264 |
20Y7 | $ 469,632 |

Answer to Problem 7.3.2C
The Net Income for each year using the MCRS Method is as follows:
Explanation of Solution
The Net Income for each year using the MCRS Method is calculated as follows:
Year | Income before Depreciation and Tax | Depreciation | Income before Tax | Income Tax | Net income |
A | B | C =A-B | D=C*40% | E=C-D | |
20Y2 | $ 400,000 | $ 30,000 | $ 370,000 | $148,000 | $ 222,000 |
20Y3 | $ 800,000 | $ 96,000 | $ 704,000 | $281,600 | $ 422,400 |
20Y4 | $ 800,000 | $ 57,600 | $ 742,400 | $296,960 | $ 445,440 |
20Y5 | $ 800,000 | $ 34,560 | $ 765,440 | $306,176 | $ 459,264 |
20Y6 | $ 800,000 | $ 34,560 | $ 765,440 | $306,176 | $ 459,264 |
20Y7 | $ 800,000 | $ 17,280 | $ 782,720 | $313,088 | $ 469,632 |
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