1. A company is purchasing a paver for $345,000. This a 5 year asset with $0 sal
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Question
1. A company is purchasing a paver for $345,000. This a 5 year asset with $0 salvage value. Develop the depreciation schedule according to MACRS.
2. Equipment bought at Kal Tech systems at a cost of $200,000 was depreciated using the double declining balance (DDB) method. In year four, the company decided switch to the straight-line depreciation method. Determine the depreciation charges in year4. Assume a depreciable life of 10 years and a salvage value of $20,000.
3. A compute cluster was purchased for $85000 (5 year asset) and it is estimated to have a salvage value of $2,000. Compute the depreciation schedule for each of the 4 methods:
a. Linear
b. SOYD
c. DDB
d. MACRS(Tabulated value)
Which one is more atrtarctive to you as a tax payer, if the market rate is 4.5% per year? Clue: compute the PW of the depereciation values for each alternative and select the one that has the highest present worth – it will result in the highest deductions and hence lower taxes)
Explanation / Answer
1. The required depr3eciation schedule according to MACRS should be developed as follows:
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