Question
In: Accounting
Freedom Corporation acquired a fixed asset for $170,000. Its estimated life at time of purchase was...
Freedom Corporation acquired a fixed asset for $170,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4,Appendix C, TABLE 1 and Appendix C, TABLE 2.)
Required:
1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.
2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges.
3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention.
Solutions
ekkarill92 answered 4 months agoRelated Solutions
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On January 1, 2018, the Allegheny Corporation purchased
machinery for $170,000. The estimated service life of the machinery
is 10 years and the estimated residual value is $5,000. The machine
is expected to produce 300,000 units during its life. Required:
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following methods.
1. Straight line.
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1/ An asset acquired January 1, 2018, for $14,300 with an
estimated 10-year life and no residual value is being depreciated
in an equipment group asset account that has an average service
life of eight years. The asset is sold on December 31, 2019, for
$5,400. The entry to record the sale would be:
Multiple Choice
Cash
5,400
Accumulated
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8,900
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14,300
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5,400
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3,575
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5,325
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Presented below is information related to Kingbird Manufacturing Corporation. Asset Cost Estimated Salvage Estimated Life (in...
Presented below is information related to Kingbird Manufacturing
Corporation.
Asset
Cost
Estimated Salvage
Estimated Life (in years)
A
$46,100
$5,700
10
B
32,500
4,600
9
C
36,400
4,000
9
D
19,900
1,700
7
E
23,400
3,600
6
New attempt is in progress. Some of the new entries may impact
the last attempt grading.Your answer is incorrect.
Compute the rate of depreciation per year to be applied to the
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Presented below is information related to Novak Manufacturing
Corporation.
Asset
Cost
Estimated Salvage
Estimated Life (in years)
A
$46,575
$6,325
10
B
38,640
5,520
9
C
41,400
4,140
9
D
21,850
1,725
7
E
27,025
2,875
6
a) Compute the rate of depreciation per year to be applied to
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b) Prepare the adjusting entry necessary at the end of the year
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Presented below is information related to Indigo Manufacturing Corporation. Asset Cost Estimated Salvage Estimated Life (in...
Presented below is information related to Indigo Manufacturing
Corporation.
Asset
Cost
Estimated Salvage
Estimated Life (in years)
A
$43,335
$5,885
10
B
35,952
5,136
9
C
38,520
3,852
9
D
20,330
1,605
7
E
25,145
2,675
6
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plant assets under the composite method. (Round answer
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2.Prepare the adjusting entry necessary at the end of the year
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QUESTION 1
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An equipment was acquired at a cost of RM300,000. Its estimated
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On January 2, 2018, Jatson Corporation acquired a new machine
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