1. (MACRS depreciation) Queens Corporation has just purchased new equipment for its research and devel- opment laboratory costing $3 million. The equipment has a six-year economic life.

a. Into which MACRS class does this asset fall?

b. Calculate the MACRS depreciation to be reported

in each year of the equipments economic life.

c. By how much is Queenss tax liability reduced due to this depreciation in each year of the equipments

economic life?

d. Assume that Queens depreciates the equipment

differently on its public financial statements, us- ing the straight-line method to zero salvage value over the equipments economic life. By how much does taxable income differ from reported income in each of the next six years due to this difference?