Question

Depreciation expense. Brock Florist Company buys a new delivery truck for $29,000. It is classified as a light-duty truck. a. Calculate the depreciation schedule using a five-year life, straight-line depreciation, and the half-year convention for the first and last years b. Calculate the depreciation schedule using a five-year life and MACRS depreciation, C. Compare the depreciation schedules from parts (a) and (b) before and after taxes using a 30% tax rate. What do you notice about the difference between these two methods? a. Using a five-year life, straight-line depreciation, and the half-year convention for the first and last years, what is the annual depreciation of the truck? (Round to the nearest dollar.) 558 0045 08-14-19766663 24449994 447 12-8884 1211 000226 002557 029115 23111 3511 3484 3447 341 12345678901

Answer 1

ans 1	Annual depreciation = 29000/5 =
				5800
	Depreciation schedule
	Year	Rate	Depreciation	Accumulated Depreciation	Book Value
	0		$0.00	$0.00	$29,000.00
	1	20%/2	$2,900	$2,900	$26,100
	2	1/5	$5,800	$8,700	$20,300
	3	1/5	$5,800	$14,500	$14,500
	4	1/5	$5,800	$20,300	$8,700
	5	1/5	$5,800	$26,100	$2,900
	6	20%/2	$2,900	$29,000	$0
ans 2	MARCS
	Year	Rate	Depreciation	Accumulated Depreciation	Book Value
	0		$0.00	$0.00	$29,000.00
	1	20.00%	$5,800	$5,800	$23,200
	2	32.00%	$9,280	$15,080	$13,920
	3	19.20%	$5,568	$20,648	$8,352
	4	11.52%	$3,341	$23,989	$5,011
	5	11.52%	$3,341	$27,330	$1,670
	6	5.76%	$1,670	$29,000	$0
ans 3	Compare -
		i	ii	iii=ii-i	iv=iii*(1-30%)
	year	Straight line depreciation	MARCS depreciation	Change (MACRS-Straight line)	Post tax compare
	1	$2,900	$5,800	$2,900	$2,030
	2	$5,800	$9,280	$3,480	$2,436
	3	$5,800	$5,568	-$232	-$162
	4	$5,800	$3,341	-$2,459	-$1,721
	5	$5,800	$3,341	-$2,459	-$1,721
	6	$2,900	$1,670	-$1,230	-$861
				$0	$0
	Finding : We can see overall duration depreciation for 6 year is equal. But under MARCS we have higher depreciation
	during initial year compared to straight line this is due to accelerated rate used for MARCS during initial years.
	Same is the observation for post tax depreciation