Trenton Fabrication Company purchased industrial tools costing $170,000, which f

Question

Trenton Fabrication Company purchased industrial tools costing $170,000, which fall in the 3-year property class under MACRS.

Use Appendix A and Exhibit 16-9 for your reference. (Use appropriate factor(s) from the tables provided.). (Round your final answers to the nearest dollar amount.)

Apendix A is a Present Value Table. Exhibit 16-9 is a MACRS table

1. Prepare a schedule of depreciation deductions assuming:

a. The firm uses the accelerated depreciation schedule specified by MACRS

b. The firm uses the optional straight-line depreciation method and the half-year convention.

2. Calculate the present value of the depreciation tax shield under each depreciation method listed in part (1). Trenton Fabrication Company’s after-tax hurdle rate is 12 percent, and the firm’s tax rate is 30 percent.

Year Accelerated Depreciation 1 2 3 4

Explanation / Answer

1.Schedule of depreciation deductions assuming:

a. The firm uses the accelerated depreciation schedule specified by MACRS,Trenton Fabrication Company purchased industrial tools costing $170,000, which fall in the 3-year property class under MACRS.

b. The firm uses the optional straight-line depreciation method and the half-year convention.

c

Year Depreciation Rate% Accelerate Depreciation$ Depreciation tax shied = Depreciation*30% PVF @12% PV $ 1 33.33            56,661 ($170,000*33.33%)       16,998.30 0.8929       15,177 2 44.45            75,565 ($170,000*44.45%)       22,669.50 0.7972       18,072 3 14.81            25,177 ($170,000*14.81%)         7,553.10 0.7118        5,376 4 7.41            12,597 ($170,000*7.41%)         3,779.10 0.6355        2,402 Total          170,000       41,027

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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