Sprint LTE 5:15 AM State University of New York Magnum Construction Company, Inc

Question

Sprint LTE 5:15 AM State University of New York Magnum Construction Company, Inc. bought equipment for $2,250,000 on Jan. 1, 2014 The company considered various depreciation methods for financial reporting purposes (pro-rated by month). The company estimates the equipment will have a useful life of 10-ycars with a residual value of $140,000. For tax purposes the asset falls into the seven-year category. Hours 50,000 5,500 6,000 4,500 Estimated total hours of usage Actual usage Instructions Calculate the following a Assuming the straight-line method is used: (1) The depreciation expense for the year ended Dec. 31, 2014 (2) The book value of the assets as of December 31, 2015 (2nd year) (3) The depreciation expense for the nine-month period ending Sept. 30, 2016 (4) The gain or loss if the asset is sold on Sept. 30, 2016 for> $1,700,000 bAssuming double declining balance is used (1) The depreciation expense for the year ended Dec. 31, 2014 (2) The book value of the assets as of December 31, 2015 (2rd year) (3) The depreciation expense for the nine month period ending Sept. 30, 2016 (4) The gain or loss if the asset is sold on Sept. 30, 2016 for> $1,700,000 cAssuming sum of the years digits is used: (1) The depreciation expense for the year ended Dec. 31, 2014 (2) The book value of the assets as of December 31, 2015 (2rd year) (3) The depreciation expense for the nine month period ending Sept. 30, 2016 (4) The gain or loss if the asset is sold on Sept. 30, 2016 for> $1,700,000 ssuming units of output is used (1) The depreciation expense for the year ended Dec. 31, 2014 (2) The book value of the assets as of December 31, 2015 (2rd year) (3) The depreciation expense for the nine month period ending Sept. 30, 2016 (4) The gain or loss if the asset is sold on Sept. 30, 2016 for > $1,700,000 e The tax basis (undepreciated cost) the asset as of December 31, 2017 e taxable gain or loss if the asset is sold on Dec. 31, 2017 for $852,900 MACRS tax depreciation rates Asset classification Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-year 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%

Explanation / Answer

a) 1. Depriciation Expanse for the year ended Dec'14 -  

(2250000-140000)/10= $ 211000

2. Boook value as on ended Dec'15 -

2250000- (2250000-140000)*2/10= 2250000- 422000= $ 1828000

3. Depriciation for the nineth month year ended 30th Sept 2016:-

(2250000-140000)*9*1/(12*10)= 158250

4. Profit(loss) as on 30th Sept 2016:-

1700000- (2250000-211000-211000-158250) = 1700000-1669750= $ 30250 gain

b). 1. Depriciation Expanse for the year ended Dec'14 -  

(2250000-140000)*2/10= $ 422000

2. Book Value for the year ended Dec'15 -

2250000- (2250000-140000)*4/10= 2250000- 844000= $ 1406000

3. Depriciation for the nineth month year ended 30th Sept 2016:-

(2250000-140000)*9*2/(12*10)= $ 316500

4. Profit(loss) as on 30th Sept 2016:-

1700000- (2250000-422000-422000-316500) = 1700000-1089500= $ 610500 gain

c) 1. Depriciation Expanse for the year ended Dec'14 -  

(2250000-140000)/8= $ 263750

2. Boook value as on ended Dec'15 -

2250000- (2250000-140000)*2/8= 2250000- 527500= $ 1722500

3. Depriciation for the nineth month year ended 30th Sept 2016:-

(2250000-140000)*9*1/(12*8)= $ 197812.50

4. Profit(loss) as on 30th Sept 2016:-

1700000- (2250000-263750-263750-197812.50) = 1700000-1524687.50= $ 175312.50 gain

d.) 1. Depriciation Expanse for the year ended Dec'14 -  

(2250000-140000)*5500/50000= $ 232100

2. Boook value as on ended Dec'15 -

2250000- (2250000-140000)*11500/50000 = 2250000- 485300= $ 1764700

3. Depriciation for the nineth month year ended 30th Sept 2016:-

(2250000-140000)*9*4500/50000 = $ 142425

4. Profit(loss) as on 30th Sept 2016:-

1700000- (2250000-232100-253200-142425) = 1700000-1622275= $ 77725 gain

e.) Tax basis as on Dec'16 :- $ 22,50,000.00

f.) Profit as on Dec'17 :-

2250000- {(2250000-140000)*(20+32+19.20)%}= 2250000-{2110000*71.20%} = 22500000- 1502320

= 747680 Gain

  

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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