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11 September, 06:41

Tad's tackle shop has a potential investment of $750,000 which generated a depreciation tax shield of $35,000 and a tax rate of 20% for 2016. how much depreciation expense did tad's tackle shop record during 2016?

a. $140,000

b. $150,000

c. $175,000

d. $7,000

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  1. 11 September, 06:45
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    Potential investment of the Tackle shop = $750000 Depreciation Tax Shield = $35000 Tax Rate for 2016 = 20% = > T = 0.2 So we have a equation for depreciation, which goes like Depreciation Tax Shield = T (Depreciation) = > 35000 = 0.2 (Depreciation) So the Depreciation = 35000/0.2 which gives $175,000 Depreciation = $175,000 So C is correct.
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