10.8 Depreciation expense. (10 Part Answer)
Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for $89,000. Calculate the depreciation schedule using aseven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS,
Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate.
What do you notice about the difference between these two methods?
Homework Answers
Using Straight line Method:
Depreciation = cost / useful life
= 89,000 / 7
= 12,714.29
How ever It is gven half year convention so ,
Depreciation in Year 1 = 12,714.29 / 2 = $6,357.14
From Year 2 to 7 = $12,714.29
In year 8 = $6,357.14
Using MACRS method:
| Year | Depreciation rate | Depreciation |
| 1 | 14.29% | 89000*14.29% = 12,718.10 |
| 2 | 24.49% | 89000*24.49% = 21,796.10 |
| 3 | 17.49% | 89000*17.49% = 15,566.10 |
| 4 | 12.49% | 89000*12.49% = 11,116.10 |
| 5 | 8.93% | 89000*8.93% = 7,947.70 |
| 6 | 8.93% | 89000*8.93% = 7,947.70 |
| 7 | 8.93% | 89000*8.93% = 7,947.70 |
| 8 | 4.45% | 89000*4.45% = 3,960.50 |
Difference :
You can observe that depreciation before and after tax will be higher at first in case of MACRS and gradually decreases when comapre to Straight line Depreciation
Add Answer to:
10.8 Depreciation expense. (10 Part Answer)
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Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer
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single – purpose agriculture and horticultural structure. then the
company sold the tree trimmer after four years of service. If the
seven your life and MARCS, was used for the depreciation schedule,
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35% tax rate) if
a. the sales price was $36,000?
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Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer
for $94,000. It is classified in the property class category of a
single-purpose agricultural and horticultural structure. Then the
company sold the tree trimmer after four years of service. If a
seven-year life and MACRS,
, was used for the depreciation schedule, what is the
after-tax cash flow from the sale of the trimmer (use a 40%tax
rate) if
a. the sales price was $30,000?
b. the...
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$82,000. It is classified in the property class category of a
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seven your life and MARCS, was used for the depreciation schedule,
what is the after-tax cash flow from the sale of the trimmer (use a
35% tax rate) if
a. the sales price was $36,000?
b. the...
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