Question
At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value
At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $200,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.s tax rate is 40% for 2015 and all future years.
21. At the end of 2015, what are the book basis and the tax basis of the asset?
Book basis Tax basis
a. $1,000,000 $620,000
b. $980,000 $620,000
c. $980,000 $720,000
d. $1,000,000 $720,000
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