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16 POINTS 2.The Fxx Company had purchased a machine for its business and placed it in service on 1/1/16. The machine had a useful life of 4 years for GAAP, and a 3 year ation recovery period for tax purposes. Fixox used the straight line method of de for GAAP and MACRS f or tax purposes. The cost of the machine was $24,000 and for 3 year salvage value was estimated at $4,000. The rounded MACRS percentages for property are Year 1 Year 2 Year 3 Year 4 y 33% 44% 15% 8% e company has recorded all depreciation for GAAP and Tax Purposes up through 12/31/17. On 1/1/18 the property is sold $16,500 Th SHOW ALL OF YOUR WORK- ROUND ALL OF YOUR WORK TO THE NEAREST WHOLE DOLLAR. A. Calculate the deprecation expense for 2016 and 2017 for GAAP and for TAX purposes B. As of 12/31/17, what is the book value of the asset? For GAAP For Tax C, What is the gain or loss on the sale on 1/1/18? For GAAP For Tax
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Workings Depreciation expense for GAAP Purpose Particulars Amount Cost of Machine Salvage Value Net Recovery value Usage life per GAAP Depreciation per year for GAAP purposes 24,000.00 4,000.00 20,000.00 4 years 5,000.00 MARCS Depreciaton calculation for Tax purpose Year Particulars Amount Cost of Machinery Depreciation expesnes for Tax purpose 24,000.00 Yearl Year2 Year3 Year4 33% $ 44% $ 15% $ 8% $ 7,920.00 10,560.00 3,600.00 1,920.00 Depreciation expense GAAP Tax 2016 $ 2017 $ 5,000.00$ 5,000.00$ Year 7,920.00 10,560.00 Year Book value of Asset GAAP Tax 31-Dec-16 31-Dec-17 $ 19,000.00 $ 14,000.00 $ Year 16,080.00 5,520.00 Year Gain or Loss on sale of Asset GAAP Tax 14,000.00 $ 16,500.00 $ 2,500.00 $ 01-Jan-18 Book value of Asset Sale of Asset Gain/(Loss) on Sale of Asset 5,520.00 16,500.00 10,980.00

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