In April of the current year, Blue Corporation purchased an asset to be used in its manufacturing

Question:

In April of the current year, Blue purchased an asset to be used in its manufacturing operations for $100,000. Blue's management expects the asset to ratably provide valuable services in the production process for eight years and have a of $12,000. The asset is a five-year asset for tax purposes. Blue has adopted the half-year convention for book purposes in the year of acquisition and disposition; Blue uses MACRS for tax purposes.
a. Compute the depreciation expense in the year of acquisition for book and tax purposes.
b. Identify the book-tax difference related to the depreciation expense in the year of acquisition.
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