1. Yamachi and Nadler has a gross income of $7.5 million for the year. The combi

Question

1. Yamachi and Nadler has a gross income of $7.5 million for the year.  The combination of depreciation and operating expenses total $4.3 million for the year.  Calculate the companys federal income tax liability for the year.   

2. An asset that was depreciated over a five-year period by the MACRS method has a book value of $33,025 at the end of year three.   Calculate the original purchase price of the asset.

3

NA Forest Resources purchased forest acreage for $500,000 from which an estimated 200 million board feet is recoverable.  In its first year of operation, the company recovered 24 million board feet.  Find the cost depletion allowance the company can claim during its first year of operation.   

Show all works pleases!

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Tax Rate = .072 + (1-.072)*.35 = .3968

Net Income = 7.5 - 4.3 = 3.2 million

Taxes = 3200000*.3968 = 1269760

Part 2:

Let the Purchase Price Be X

Book Value = Original Cost = Original Cost*(Depreciation Rate for 3 Years)

33025 = X - X(.20 + .32 +. 192)

.288X = 33025

X = 33025/.288 = 114670.1389 or 114670.14

Original Cost = 114670.1389 or 114670.14

Part 3:

Cost Depletion Allowance = 500000*24/200 = 60000

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.