Biohazard Inc created a product to dispose of personal medical waste safely for regular consumers. It will be sold for $50 each. To start this venture, $700,000 of equipment will have to be purchased. Additional working capital of 150k will be required in year 0 and 100k in year 1. Revenue is forecasted at 500k for year 1 and will grow 50k/year through year 5. Annual operating expenses are estimated at 250k in year 1 and will continue to grow by 25k per year until the end of the project’s life. Straight line depreciation will be used for the equipment over 10 years. It’s salvage value at the end of 10 years is estimated at 50k. The tax rate will be 40%.

Calculate the net investment (year 0 cash flow) and the net cash flow for years 1, 2 and 10.

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475, 000 units of product during its life. It actually produces the following units: 220,000 in 1^st year, 124,000 in 2^nd year, 121,800 in 3^rd year, 15,200 in 4^th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required:

Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

. On December 31, Year One, the Abertion Company decides to lease a piece of equipment rather than buy it. The lease is for 10 years. Payments are $22,000 each December 31 beginning on December 31, Year One. Abertion has an annual incremental borrowing rate of 9 percent. The present value of an annuity due of $1 at 9 percent for 10 periods is $6.99525. a. Assume this lease is an operating lease. What journal entries are made in Year One and Year Two? b. Assume this lease is an operating lease. What is shown on the company’s balance sheet at the end of Year Two? c. Assume this lease is a capital lease. What journal entries are made in Year One and Year Two? d. Assume this lease is a capital lease. What is shown on the company’s balance sheet at the end of Year Two?

In the current year Mike reports income and losses from the following​ activities:

Activity X

$27,000

Activity Y

(16,000)

Activity Z

(23,000)

Salary

175,000

Activities​ X, Y, and Z are all passive with respect to Mike. Activity Z has $35,000 in passive losses which are carried over from the prior year. In the current year Mike sells activity Z for a taxable gain of $22,000.

Requirement

a. What is the amount of loss that Mike may deduct and what is the amount that must be carried over in the current​ year? ​(Enter a​ "0" for amounts with a zero​ balance.)

Requirement b. Based solely on the amounts​ above, compute Mike​'s AGI for the current year.

In Tax Accounting   

A machine costing $215,600 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 489,000 units of product during its life. It actually produces the following units: 121,500 in 1st year, 123,000 in 2nd year, 121,500 in 3rd year, 133,000 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Unit of production and Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.

Calculating Operating Cash Flows (Direct Method)

Calculate the cash flow for each of the following cases.

a. Cash paid for advertising:

b. Cash paid for income taxes:

c. Cash paid for merchandise purchased:

Exercise 8-9A Computing and recording straight-line versus double-declining-balance depreciation LO 8-2, 8-3

At the beginning of Year 1, Copland Drugstore purchased a new computer system for 85,000. It is expected to have a five-year life and a $15,000 salvage value.

Required
a. Compute the depreciation for each of the five years, assuming that the company uses

(1) Straight-line depreciation. (I had 7000 as the answer but it is incorrect)

2) Double-declining-balance depreciation. (Year 4 and 5 I have incorrect)