5. The XYZ Company builds finished plastic products and has decided to build a n

Question

5. The XYZ Company builds finished plastic products and has decided to build a new plant. Land cost is $650,000, a plant is built for $1,400,000, manufacturing equipment (special tools) is installed at a cost of $600,000. The factory was completed and began operation on June 1. The gross income for the calendar year was $1,700,000. Supplies and operating expenses excluding capital expenditures were $600,000. What is firms taxable income for the first year? b. How much in taxes will the firm pay in the first year? Use MACRS Depreciation for all capital assets. a. a. b.

Explanation / Answer

Life Depreciation Land Cost 650000 Plant Cost 1400000 7 200000 Special Tools 600000 3 200000 1st June Started Operations Gross Income 1700000 Supplies & Opex 600000 Gross Margin 1100000 Depreciation 400000 Taxable Income 700000 Taxe to be paid 277200

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