Question

In: Finance

Woodland Lake Manufacturing has a new project that requires $652,000 of equipment. What is the depreciation...

Woodland Lake Manufacturing has a new project that requires $652,000 of equipment. What is the depreciation in Year 5 of this project if the equipment is classified as seven-year property for MACRS purposes? The MACRS allowance percentages are as follows, commencing with year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Solutions

Expert Solution

Depreciation in Year 5 is $ 58,223.60

Depreciation Schedule under MACRS method:
Year Cost Depreciation rate Depreciation expense Accumulated Depreciation expense Book Value at the end of year
1 $       6,52,000 14.29% $     93,170.80 $     93,170.80 $ 5,58,829.20
2 $       6,52,000 24.49% $ 1,59,674.80 $ 2,52,845.60 $ 3,99,154.40
3 $       6,52,000 17.49% $ 1,14,034.80 $ 3,66,880.40 $ 2,85,119.60
4 $       6,52,000 12.49% $     81,434.80 $ 4,48,315.20 $ 2,03,684.80
5 $       6,52,000 8.93% $     58,223.60 $ 5,06,538.80 $ 1,45,461.20
6 $       6,52,000 8.92% $     58,158.40 $ 5,64,697.20 $     87,302.80
7 $       6,52,000 8.93% $     58,223.60 $ 6,22,920.80 $     29,079.20
8 $       6,52,000 4.46% $     29,079.20 $ 6,52,000.00 $ 00.00

jeff jeffy answered 7 months ago
Next > < Previous

Related Solutions

A firm is considering a project that requires no new purchases of equipment. Instead, they will...
A firm is considering a project that requires no new purchases of equipment. Instead, they will repurpose existing machines that they already own. These machines were originally bought for $1 million 10 years ago and were depreciated straight line over that period to a book value of $0 today. Their market value is estimated to be $65,000. The machines require no investment in repairs or refurbishment for the new project. The new project is expected to generate revenues of $90,000...
Sonoco Inc is evaluating a 4-year project that requires $118,000 of new equipment. This equipment will...
Sonoco Inc is evaluating a 4-year project that requires $118,000 of new equipment. This equipment will be depreciated straight-line to a zero-book value over the life of the project. This project is expected to generate operating cash flows of $39,000 per year for four years. At the beginning of the project, inventory will be lowered by $9,000, accounts receivable will increase by $14,000, and accounts payable will increase by $11,000. At the end of the project, net working capital will...
Elemental is considering another project which requires new equipment at a cost of $70,000. The equipment...
Elemental is considering another project which requires new equipment at a cost of $70,000. The equipment has a 3 year tax life and will be fully depreciated by the straight-line method over 3 years. When the project closes down at the end of the third year, it is expected to sell for $5000 before taxes. The project will require new working capital of $10000, and is expected to be fully recovered at the end of the project's life. Project revenues...
A manufacturing company makes it a policy that for every new equipment purchased, the annual depreciation...
A manufacturing company makes it a policy that for every new equipment purchased, the annual depreciation cost should not exceed 25% of the first cost at any time without salvage value. Determine the length of service life if the depreciation used is the SYD method
Tamarisk Manufacturing has old equipment that cost $58,000. The equipment has accumulated depreciation of $27,200. Tamarisk...
Tamarisk Manufacturing has old equipment that cost $58,000. The equipment has accumulated depreciation of $27,200. Tamarisk has decided to sell the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (a) What entry would Tamarisk make to record the sale of the equipment for $32,000 cash? (b) What entry would Tamarisk make to record the sale...
A firm is considering a project that requires an initial investment of $300,000 in new equipment,...
A firm is considering a project that requires an initial investment of $300,000 in new equipment, which has a five-year life and a CCA rate of 30 percent. An initial investment in raw materials inventory of $50,000 is also required to support the project, which will rise to 15 percent of sales. The project will generate sales revenue of $400,000 in the first year, which will grow at 4 percent per year. Variable costs will be $220,000 for the first...
Your company is considering a new 3-year project that requires an initial investment in equipment of...
Your company is considering a new 3-year project that requires an initial investment in equipment of $3 million. Prior to this, you had engaged a consultant to study the feasibility of the new project and after an extensive market survey, the consultant confirmed your belief that the project would be viable. Your company is charged $100,000 for the feasibility study. The equipment will be depreciated straight line to zero over the 3 years of its useful life. In addition, you...
Your company is considering a new 3-year project that requires an initial investment in equipment of...
Your company is considering a new 3-year project that requires an initial investment in equipment of $3 million. Prior to this, you had engaged a consultant to study the feasibility of the new project and after an extensive market survey, the consultant confirmed your belief that the project would be viable. Your company is charged $100,000 for the feasibility study. The equipment will be depreciated straight line to zero over the 3 years of its useful life. In addition, you...
A project requires to purchase an equipment with a cost of $1.55 million. The equipment will...
A project requires to purchase an equipment with a cost of $1.55 million. The equipment will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project it will be sold for a market value of $240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The project also requires an initial investment of $52,000 in net working capital, which will be recouped when...
XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project
 XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project (that will be recovered when the project ends). The projects will lead to an increase in operating pre-tax net revenue of $150,000 per year and will last for 5 years. At the end of the project (beginning of year t=6), the equipment can be sold for the salvage value of $120,000. The equipment belongs to the CCA...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT