Question

In: Accounting

Taxation 2 Depreciation/sale of assets problems On --- (a)-----, XYZ a profitable company, purchased-----(b)----. It was...

Taxation 2

Depreciation/sale of assets problems

On --- (a)-----, XYZ a profitable company, purchased-----(b)----. It was the only fixed asset purchased during the year.

(a) March 15, 2017

October 15, 2017- For purposes of this problem, assume that taxpayerwill elect to claim 50% bonus depreciation for any scenario for which bonus depreciation is being claimed.

(b) Commercial building costing $ 1,000,000

Machinary costing $1,000,000

Machinary costing $ 2,270,000

Machinary costing $ 3,000,000

Computer equipment cost. $ 500,000

Automobile costing $ 50,000

Required:

1. Assuming that the company wants to maximize its writeoff for 2017, what is the maximum writeoff for 2017? What would the 2018 deduction be?

2. Assuming that the company does not elect Section 179 treatment, what is the maximum writeoff for 2017? For 2018? (Bonus depreciation elected)

3. Assuming that the company elects out of bonus depreciation, what is the maximum writeoff for 2017? For 2018? (Section 179 elected)

4.Assuming that the company does not elect section 179 treatment and elects out of bonus depreciation, what is the writeoff for 2017? For 2018?

Solutions

Expert Solution

If the company elects to 50% depreciation in 2017, then the same rate is applicable for 2018

Therefore, the depreciation would be:

Commercial building: 0.50 x $1000000 = $500000

Machinery: 0.50 x $1000000 = $500000

Machinery: 0.50 x $2270000 = $1135000

Machinery: 0.50 x $3000000 = $1500000

Computer equipment: 0.50 x $500000 = $250000

Automobile: 0.50 x $50000 = $25000

If the company elects not to take 50% depreciation, then it can come under MACRS depreciation.

Accordingly the depreciation rate changes as follows:

Machineries are under 7 year property classification

Computer equipment are under 5 year property classification

Automobile being a 3 year property

Building being 10 year property

Automobile: .3333 x $50000 = $16667

Computer equipment: 0.20 x $500000 = $100000

Machinery: 0.1429 x $1000000 = $142900

Machinery: 0. 1429 x $2270000 = $324383

Machinery: 0. 1429 x $3000000 = $428700

Commercial building: 0.10 x $1000000 = $100000               

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

In the recognition of depreciation of assets there is a difference with the recognition of taxation,...
In the recognition of depreciation of assets there is a difference with the recognition of taxation, how do companies handle it?
Part 1: Acquiring Assets XYZ Corporation purchased the following assets during the year. Assist XYZ Corporation...
Part 1: Acquiring Assets XYZ Corporation purchased the following assets during the year. Assist XYZ Corporation by determining the cost of each asset. Land Costs: Purchase price                                                              $119,520 Surveying fees                                                                   3,550 Title insurance                                                                   1,270 Excavating fees necessary to pass safety inspection           10,250 Building Costs: Purchase price                                                              $425,000 Title fees                                                                             7,270 Legal fees                                                                               520 Realty fees                                                                         14,560 Interest charges from the first year of the mortgage            12,400 Renovation and repair to make the...
XYZ has Sale s= 4,000, COGS = 2,000, Depreciation = 400, Interest = 600. The tax...
XYZ has Sale s= 4,000, COGS = 2,000, Depreciation = 400, Interest = 600. The tax rates are:10% for taxable income up to 500, 15% for the next 500, and 20% for any taxable income above 1,000 1. What is XYZ’s Interest Tax Shield (ITS)? A. 90 B.   120 C. 85 D. none of the above 2. What would be the ITS if depreciation is increased to 1,000? A. 90 B.   120 C. 85 D. none of the above
Calculate the total depreciation for these various assets - All assets are business use. Joe purchased...
Calculate the total depreciation for these various assets - All assets are business use. Joe purchased a 5 year asset for $1,190,000 on 6/13/2020. Joe wants to take the maximum amount of Sec 179 depreciation as possible. Taxable income for 2020 was $1,125,000. Calculate the depreciation expense for 2020. Joe sold the asset in 2021. Additional first year depreciation was not taken in 2020. Calculate the depreciation for 2021. 2020: 2021: Sarah purchased an apartment complex on 5/5/2020 for $1,100,000....
Topic on: Non-Current Assets Held For Sale On January 1, 2020, Racelle Company purchased land at...
Topic on: Non-Current Assets Held For Sale On January 1, 2020, Racelle Company purchased land at a cost of P6,000,000. The entity used the REVALUATION MODEL for this asset. The fair value of the land was P7,000,000 on Dec. 31, 2020 and P8,500,000 on Dec 31, 2021. On July 1, 2022, the entity decided to sell the land and therefore classified the asset as held for sale. The fair value of the land on July 1, 2022 is P7,600,000. The...
INCOME STATEMENT NET INCOME $       7,945 DEPRECIATION EXPENSE $       2,325 LOSS ON SALE OF PLANT ASSETS...
INCOME STATEMENT NET INCOME $       7,945 DEPRECIATION EXPENSE $       2,325 LOSS ON SALE OF PLANT ASSETS $         375 ADDITIONAL INFO NEW PLANT ASSETS PURCHASED $       4,250 OLD PLANT ASSETS SOLD FOR CASH $           75 ORIGINAL COST $       2,875 BONDS MATURED AND PAID OFF IN CASH CASH DIVIDEND PAID $2,018 INSTRUCTIONS PREPARE THE WORKSHEET FOR THE STATEMENT OF CASH FLOW. PREPARE THE ACTUAL STATEMENT OF CASH FLOWS. NOTE: If it is easier for you to just do the actual statement of...
Depreciation by Two Methods; Sale of Long-term or relatively permanent tangible assets such as equipment, machinery,...
Depreciation by Two Methods; Sale of Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.Fixed Asset New tire retreading equipment, acquired at a cost of $718,750 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated The estimated value of a fixed asset at the end of its useful life.residual value of $61,800....
Depreciation and Rate of Return Burrell Company purchased a machine for $51,000 on January 2, 2016....
Depreciation and Rate of Return Burrell Company purchased a machine for $51,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $25,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods....
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the...
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In 2016, Gruman uses the machine for 1,700 hours and produces 45,000 units. In 2017, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. If Gruman used a service life of 8 years or 15,000 hours...
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the...
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In 2016, Gruman uses the machine for 2,000 hours and produces 40,000 units. In 2017, Gruman uses the machine for 1,400 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. Required: Compute the depreciation for 2016 and 2017 under each of the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT