Question

On April 1, 2024, Titan Corporation purchases office equipment for $50,000. For tax reporting, the company uses MACRS and classifies the equipment as 5-year personal property. In 2024, this type of equipment is eligible for 60% first-year bonus depreciation. For financial reporting, the company uses straight-line depreciation. Assume the equipment has no residual value.

Required:

1. Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes.
2. Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes.
3. In which year(s) is tax depreciation greater than financial reporting depreciation?

• Required 1
• Required 2
• Required 3

Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes. (Round "Depreciation Rate per MACRS" answers to 2 decimal places. Round your final answers to nearest whole dollars. Leave no cell blank. Ensure to enter zero wherever applicable.)

	Year Depreciation Basis for MACRS × Depreciation Rate per MACRS = MACRS Depreciation Bonus Depreciation Total Depreciation 2024 % 2025 % 2026 % 2027 % 2028 % 2029 % Total %

• Required 2
• Required 3

Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes.

	Year Depreciation 2024 2025 2026 2027 2028 2029 Total

In which year(s) is tax depreciation greater than financial reporting depreciation?

	In which year(s) is tax depreciation greater than financial reporting depreciation?

Answer 1

Answer:
Calculation of Depreciation According to MACRS
	60% Bonus		Balance Portion
			(40%)
Cost	$	50000		20000
Year	Bonus Depreciation	% Of Depreciation	Depreciation Rate per MACRS	Total Depreciation
2024	$30,000	20%	$4,000	$34,000
2025		32%	$6,400	$6,400
2026		19.20%	$3,840	$3,840
2027		11.52%	$2,304	$2,304
2028		11.52%	$2,304	$2,304
2029		5.76%	$1,152	$1,152
Total	$30,000	100%	$20,000	$50,000
Calculation of Depreciation using Straight Line Method
Cost         $	50000
Year	Dep Use St Line	Book Value
2024	$7,500	$50,000
2025	$10,000	$42,500
2026	$10,000	$32,500
2027	$10,000	$22,500
2028	$10,000	$12,500
2029	$2,500
Total	$50,000

Depreciation Comparision (MACRS VS Straight Line Method)
Year	Total Depreciation as	Total Depreciation as	Excese Or Decrese
	per MACRS	per Straight Method
2024	$34,000	$7,500	$26,500
2025	$6,400	$10,000	($3,600)
2026	$3,840	$10,000	($6,160)
2027	$2,304	$10,000	($7,696)
2028	$2,304	$10,000	($7,696)
2029	$1,152	$2,500	($1,348)
Total	$50,000	$50,000
In Year 2024Tax Depreciation is higher than financial reporting Depreciation By $ 26500 as calculated above