Cordet's Café has a potential investment of $900,000, which generated a depreciation tax shield of $60,000 and a tax rate of 25% for 2009. How much depreciation expense did Cordet's Café record during 2009? A) $15,000 B) $80,000 C) $240,000 D) $225,000

Question

Kyra Booth

Business

2 September, 17:34

Cordet's Café has a potential investment of $900,000, which generated a depreciation tax shield of $60,000 and a tax rate of 25% for 2009. How much depreciation expense did Cordet's Café record during 2009? A) $15,000 B) $80,000 C) $240,000 D) $225,000

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Answers (1)

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Antony Villarreal · Answer 1

The correct answer to the following question is C) $240,000.

Explanation:

The given information -

Potential investment = $900,000

Depreciation tax shield = $60,000

Tax rate = 25%

The amount of depreciation expenses recorded by cordet's cafe would be -

Potential investment x Tax rate + Depreciation tax shield x Tax rate

= $900,000 x 25% + $60,000 x 25%

= $225,000 + $15,000

= $240,000