Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time...

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Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time of purchase was 4 years, wi

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Answer 1

Answer #1

Part 1

	Depreciation method		Difference
Year	SYD	SL	Amount	Tax effect	PV Factor @ 11%	PV of Tax Effect
1	80000	50000	30000	12000	0.9009	10811
2	60000	50000	10000	4000	0.8116	3246
3	40000	50000	(10000)	(4000)	0.7312	-2925
4	20000	50000	(30000)	(12000)	0.6587	-7904

SYD

Year 1 = 200000*4/10 = 80000

Year 2 = 200000*3/10 = 60000

Year 3 = 200000*2/10 = 40000

Year 4 = 200000*1/10 = 20000

SL

Depreciation = 200000/4 = 50000

Part 2

	Depreciation method		Difference
Year	Double declining method	SL	Amount	Tax effect	PV Factor @ 11%	PV of Tax Effect
1	100000	50000	50000	20000	0.9009	18018
2	50000	50000	0	0	0.8116	0
3	25000	50000	(25000)	-10000	0.7312	-7312
4	25000	50000	(25000)	-10000	0.6587	-6587
						$4119

Double declining method

Deprecation rate = ¼*2 = 50%

Year 1 =200000*50% = 100000

Year 2 = 100000*50% = 50000

Year 3 = 50000*50% = 25000

Year 4 = 25000

SL

Depreciation = 200000/4 = 50000

Part 3

	Depreciation method		Difference
Year	MACRS	SL	Amount	Tax effect	PV Factor @ 11%	PV of Tax Effect
1	66660	50000	16660	6664	0.9009	6004
2	88900	50000	38900	15560	0.8116	12628
3	29620	50000	(20380)	-8152	0.7312	-5961
4	14820	50000	(35180)	-14072	0.6587	-9269
						$3402

MACRS

Year 1 =200000*33.33% = 66660

Year 2 = 200000*44.45% = 88900

Year 3 = 200000*14.81% = 29620

Year 4 = 200000*7.41% = 14820

SL

Depreciation = 200000/4 = 50000

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Answer 2

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