Question

11-27 The XYZ Block comparing Depreciation Methods XYZ Block Company purchased a new office puter and other depreciable computer hardware for $12,000. During the third year, the computer is declared obsolete and is donated to the local commu- nity college. Using an interest rate of 10%, calculate the PW of the depreciation deductions. Assume that no salvage value was initially declared and that the machine was expected to last 5 years. (a) Straight-line depreciation (b) Double declining balance depreciation (C) 100% bonus depreciation (d) MACRS depreciation Which method is preferred for determining firm's taxes?

Answer 1

SOLi epaeciation fStoightine method; 12,000 cot Value o Saluog e 5years ayt caluclate tho deprecialion Can Know asalvage vot co de preciation Famala 1a,000-0 5yeaVs S13,006 5 3,400 pei anum every yeay (b) Doa ble declaining balance epe cati on' Tho Rate o given Apreciation s year apet L

Pages ThO Rate o epre ciation 20. Double d Than Rate the (Jox) onde o double dectining batance Rate = 40 year ui800 10000 3year २।६80 00 3 000- pu800 -a88o =fu,320x 12000-4800-J2880 =$2,592x40-03 5th year1000 -$u800- 2188o-1,128-03 555 year 00 th year 5 yea pouble de claing batance Depreciation Jn -4प806 12.830 and 3rd uth 1,03 :6 sth

Page-3 (d) MACRSeeciation : The ayet o e 5 yean dlepoited^ yea UndemARCA beprecfationa 6years are 20. 7 40-x11000 2, 400 00 321 3840 32 $ 1a000 T00 3rd 920. 1१३0-/- R304 192 K 52 52 12/000 5th 52 12/000 576 56 6 years are Tha macp depoeciation n a,400 $ 3gu0 3,304 2nd 3rd 11383.4 uth Sth 1,38a.4 6 th e) Dep aeciation method etaimi ni ng acng MACR

Page-4 The de termining Depsieciation Rat e af should be afptfed tak Per MACR tpaying method Peejerr ed mACR takable Value Firms Value The Depoeciation which H teayt, that method choden De termining irm vatue Dep re ciation Should te The Poiojit be caue hen (ow be came Tha Depreciation Expensc e, tha paojit wil be mae becau the expense eN me thody o depreciatim can be y TWO NOt eg al ) un ethical FAeparation oinancial fake ments , one Jn Come ak method & methool odeprecfat in another Yat e dprent methody depreciation TWO Can be u