In: Accounting
As per MACRS schedule the useful life of the office furniture is 7 years.
To calculate the depreciation, Standard 7 years MACRS table is used.
Beginning book Value | Dep Allowance Factor | Depreciation | Ending Book Value |
10,000 | 0.1429 | 10,000*0.1429=1429 | 8571 |
8571 | 0.2449 | 10,000*0.2449=2449 | 6122 |
6122 | 0.1749 | 10,000*0.1749=1749 | 4373 |
4373 | 0.1249 | 10,000*0.1249=1249 | 3124 |
3124 | 0.0893 | 10,000*0.0893=893 | 2231 |
2231 | 0.0892 | 10,000*0.092=892 | 1339 |
1339 | 0.0893 | 10,000*0.0893=893 | 446 |
446 | 0.0446 | 10,000*0.0446=446 | 0 |
The Eight Years analysis is as below:-
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
Before Tax Cash Flow | 5000 | 5000 | 5000 | 8000 | 8000 | 8000 | 8000 | 8000 |
Depreciation | 1429 | 2449 | 1749 | 1249 | 893 | 892 | 893 | 446 |
Taxable Income | 3571 | 2551 | 3251 | 6751 | 7107 | 7108 | 7107 | 7554 |
Taxes | 3571*0.35=1249.85 | 2551*0.35=892.85 | 3251*0.35=1137.85 | 6751*0.35=2362 | 7107*0.35=2487.45 | 7108*0.35=2487.8 | 7107*0.35=2487.45 | 7554*0.35=2643.9 |
After Tax Cash Flow | 2321.15 | 1658.15 | 2113.15 | 4389 | 4619.55 | 4620.2 | 4619.55 | 4910.1 |