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 5 months agoRelated Solutions
On January 1, 2018, the Allegheny Corporation purchased machinery for $170,000. The estimated service life of...
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:
Calculate depreciation for 2018 and 2019 using each of the
following methods.
1. Straight line.
2. Sum-of-the-years'-digits.
3. Double-declining balance.
4. One hundred fifty percent declining balance.
5. Units of production (units produced in 2018, 45,000; units
produced in 2019,...
1/ An asset acquired January 1, 2018, for $14,300 with an estimated 10-year life and no...
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
depreciation
8,900
Equipment
14,300
Cash
5,400
Accumulated
depreciation
3,575
Loss on sale of
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5,325
Equipment
14,300
Cash
5,400
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Fang Corp. acquired an asset on August 1, 2021, for $33,000 with
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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
plant assets under the composite method. (Round answer
to 2 decimal place,...
Presented below is information related to Novak Manufacturing Corporation. Asset Cost Estimated Salvage Estimated Life (in...
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
the plant assets under the composite method. (Round
answer to 2 decimal place, e.g. 4.83%.)
b) Prepare the adjusting entry necessary at the end of the year
to record depreciation for...
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
1.Compute the rate of depreciation per year to be applied to the
plant assets under the composite method. (Round answer
to 2 decimal place, e.g. 4.83%.)
2.Prepare the adjusting entry necessary at the end of the year
to record depreciation for the year....
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six years of use - 2006 through 2011, but not for the half year in
2012.) Journalize the following entries:
(a) Journalize the depreciation for the one-half year prior to
the sale, using the straight-line...
QUESTION 1 An equipment was acquired at a cost of RM300,000. Its estimated useful life is...
QUESTION 1
An equipment was acquired at a cost of RM300,000. Its estimated
useful life is five years. It is expected that the salvage value
for the equipment is RM50,000. Using the sum of year digit method,
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QUESTION 1 An equipment was acquired at a cost of RM300,000. Its estimated useful life is...
QUESTION 1
An equipment was acquired at a cost of RM300,000. Its estimated
useful life is five years. It is expected that the salvage value
for the equipment is RM50,000. Using the sum of year digit method,
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On January 2, 2018, Jatson Corporation acquired a new machine with an estimated useful life of...
On January 2, 2018, Jatson Corporation acquired a new machine
with an estimated useful life of five years. The cost of the
equipment was $60,000 with an estimated residual value of
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a-1. Prepare a complete depreciation table under the
straight-line method. Assume that a full year of depreciation was
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a-3. Prepare a complete...
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