1a. In carly 2015, Sosa Enterprises purchased a new machine for $10,000 to make
ID: 2611751 • Letter: 1
Question
1a. In carly 2015, Sosa Enterprises purchased a new machine for $10,000 to make cork for wine bottles. The machine has a 3-year recovery period and is expected to stopper have a salvage value of $2,000. Develop a depreciation schedule for this asset using the MACRS depeeciation percentages in Table 4.2 on textbook page 120. (4 points) Ib. Corporations face the following corporatc tax schedule: Tax on Base of Bracket Percentage on Excess above Base Taxable Income $ 0-$ 50,000 S 50,000 $ 75,000 $ 75,000 -$100,000 $100,000- $335,000 7,500 13,750 22,250 15% 25% 34% 39% If a firm has $180,000 of taxable income, what is its tax liability? (4 points)Explanation / Answer
Answer
1-a
Cost = 10,000
Depreciation = Cost * Depreciation Rate
Year
Asset Cost
Depreciable Cost
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
Beginning Year 1
10,000
Year 1
10,000
58.33%
5833
5833
4,167
Year 2
10,000
27.78%
2778
8611
1,389
Year 3
10,000
12.35%
1235
9846
154
Year 4
10,000
1.54%
154
10000
0
1-b
Tax on 180,000
= $22,250 + 39% * (180,000 – 100,000)
Tax = $53,450
Year
Asset Cost
Depreciable Cost
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
Beginning Year 1
10,000
Year 1
10,000
58.33%
5833
5833
4,167
Year 2
10,000
27.78%
2778
8611
1,389
Year 3
10,000
12.35%
1235
9846
154
Year 4
10,000
1.54%
154
10000
0
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