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17 July, 11:19

The following financial information applied to your company for 2018:

• Sales revenues, $4,350,000 • Labor and materials, $970,000

• Depreciation for existing assets purchased prior to 2018, $80,000

• On January 5, 2018, you purchased $130,000 of equipment classified as 5-year MACRS assets

• On September 23, 2018, you purchased $210,000 of equipment classified as 7-year MACRS assets

a) Calculate the total depreciation expenses allowed in 2018.

b) Calculate the taxes your company owes for 2018 and your net income for 2018.

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Answers (1)
  1. 17 July, 11:22
    0
    a) fiscal-year depreciation 136,009

    b) fiscal year taxable income 3,243,991

    Explanation:

    fiscal-year depreciation:

    The MACRS (Modified Accelerated Cost Recovery System) always use alf-year convention

    for the 5-year class:

    130,000 x 20% = 26,000

    for the 7-years class:

    210,000 x 14.29% = 30,009

    previous year assets: 80,000

    total depreciation: 136.009

    taxale income:

    sales revenues 4,350,000

    operating expense (970,000)

    depreciaiton expense (136, 009)

    net income: 3,243,991
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