Homework Answers
| Depreciation | |||||
| SLN | TaxSavings@40% - A | SYD | TaxSavings@40% - B | Incremental Tax Savings (A-B) | Present Value @8% |
| 25000 | 10000 | 40000 | 16000 | 6000 | 5556 |
| 25000 | 10000 | 30000 | 12000 | 2000 | 1715 |
| 25000 | 10000 | 20000 | 8000 | -2000 | -1588 |
| 25000 | 10000 | 10000 | 4000 | -6000 | -4410 |
| Incremental PV Benefit using SYD Method | 1272 | ||||
| SLN | TaxSavings@40% - A | DDB | TaxSavings@40% - B | Incremental Tax Savings (A-B) | Present Value@8% |
| 25000 | 10000 | 50000 | 20000 | 10000 | 9259 |
| 25000 | 10000 | 25000 | 10000 | 0 | 0 |
| 25000 | 10000 | 12500 | 5000 | -5000 | -3969 |
| 25000 | 10000 | 12500 | 5000 | -5000 | -3675 |
| Incremental PV Benefit using DDB Method | 1615 | ||||
| SLN | TaxSavings@40% - A | MACRS | TaxSavings@40% - B | Incremental Tax Savings (A-B) | Present Value@8% |
| 25000 | 10000 | 33330 | 13332 | 3332 | 3085 |
| 25000 | 10000 | 44450 | 17780 | 7780 | 6670 |
| 25000 | 10000 | 14810 | 5924 | -4076 | -3236 |
| 25000 | 10000 | 7410 | 2964 | -7036 | -5172 |
| Incremental PV Benefit using MACRS Method | 1348 | ||||
1. SLM Depreciation = 100000/4 = 25000
2. Double Declining Balance
= 100%/4*2 = 50%
| Opening Value | Depreciaton @50% | Closing Value |
| 100000 | 50000 | 50000 |
| 50000 | 25000 | 25000 |
| 25000 | 12500 | 12500 |
| 12500 | 12500 | 0 |
3. MACRS Depreciation Rates - 3 Years Half-year Convention
| Opening Value | Dep Rate (%) | Depreciaton |
| 100000 | 33.33 | 33330 |
| 100000 | 44.45 | 44450 |
| 100000 | 14.81 | 14810 |
| 100000 | 7.41 | 7410 |
(Hope you will understand this, Please give your valuable feedback)
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Exercise 12-29 Value of Accelerated Depreciation: Sum-of-Years'-Digits (SYD) and Double Declining. Balance (DDB) Methods (LO 12-3)...
Freedom Corporation acquired a fixed asset for $120,000. Its estimated life at time of purchase was...
Freedom Corporation acquired a fixed asset for $120,000. Its
estimated life at time of purchase was 4 years, with no estimated
salvage value. Assume a discount rate of 7% and an income tax rate
of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C,
TABLE 2.)
Required: 1. What is the incremental present value of the tax
benefits resulting from calculating depreciation using the
sum-of-the-years’-digits (SYD) method rather than the straight-line
(SLN) method on this asset? Use the...
Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time...
Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C, TABLE 2.) 0.25 points Skipped Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line (SLN)...
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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, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C TABLE 2.) 0.25 points eBook Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN)...
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A computer chip manufacturer spent $2,500,000 to develop a special-purpose molding machine. The machine has been used for one year and is expected to be obsolete after an additional 3 years. The company uses straight-line (SLN) depreciation for this machine At the beginning of the second year, a machine salesperson offers a new, vastly more efficient machine. This machine will cost $2,000,000, reduce annual cash manufacturing costs from $1,800,000 to $1,000,000, and have zero disposal value at the end of...
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*P11-12 (L01,6) EXCEL (Depreciation—SL, DDB, SYD, Act., and MACRS) On January 1, 2016, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. Th...
*P11-12 (L01,6) EXCEL (Depreciation—SL, DDB, SYD, Act., and MACRS) On January 1, 2016, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000. Locke estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,000 units per year over the remaining useful life of the...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years. For an asset that cost $26,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years. For an asset that cost $24,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its depreciable...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line metho for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years. For an asset that cost $20,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different...
During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable...
During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% is in effect for all years. For an asset that cost $15,100 with an estimated residual value of $1100 and an estimated useful life of 10 years, the depreciation under different...
Freedom Corporation acquired a fixed asset for $120,000. Its
estimated life at time of purchase was 4 years, with no estimated
salvage value. Assume a discount rate of 7% and an income tax rate
of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C,
TABLE 2.)
Required: 1. What is the incremental present value of the tax
benefits resulting from calculating depreciation using the
sum-of-the-years’-digits (SYD) method rather than the straight-line
(SLN) method on this asset? Use the...
Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C, TABLE 2.) 0.25 points Skipped Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line (SLN)...
Check my work Freedom Corporation acquired a fixed asset for $200,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C TABLE 2.) 0.25 points eBook Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN)...
A computer chip manufacturer spent $2,500,000 to develop a special-purpose molding machine. The machine has been used for one year and is expected to be obsolete after an additional 3 years. The company uses straight-line (SLN) depreciation for this machine At the beginning of the second year, a machine salesperson offers a new, vastly more efficient machine. This machine will cost $2,000,000, reduce annual cash manufacturing costs from $1,800,000 to $1,000,000, and have zero disposal value at the end of...
P11-11. (Depreciation for Partial Periods—SL, Act., SYD, and DDB) (LO 1, 2) On January 1, 2015, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 20,000 hours; 2016, 25,000 hours; 2017, 15,000 hours; 2018, 30,000 hours; and 2019,...
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line metho for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years. For an asset that cost $20,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different...
During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% is in effect for all years. For an asset that cost $15,100 with an estimated residual value of $1100 and an estimated useful life of 10 years, the depreciation under different...
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