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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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  1. 2 September, 17:53
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    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
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