Data table Click on the icon here in order to copy the contents of the data table below into a breadsheet.) ounded Depreciation Percentages by Recovery Year Using MACRS for irst Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 1 33% 20% 14% 2 45% 32% 25% 3 15% 19% 18% 7% 12% 12% 5 12% 9% 5% 9% 9% 4% 67899 10 Print Done = 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% X Depreciation Sosa Enterprises purchased a new machine for $12,600 to make cork stoppers for wine bottles. The machine has a 3-year recovery period and is expected to have a salvage value of $1,870. For tax purposes, the company can either use the MACRS schedule in the table to calculate depreciation expenses, or it can write off the asset's entire cost this year taking advantage of the tax code's 100% bonus depreciation provision. Comment on how each method influences Sosa's reported earnings, this year and for the next 3 years. Also comment on how each method affects cash flows over the same horizon. Which method do you think Sosa should choose and why? Using the MACRS depreciation method, complete the depreciation schedule for the asset below: (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Percentage (2) Depreciation (1) x (2) (1) 1 $12,600 $ Next (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Percentage (2) Depreciation (1) x (2) (1) 2 $12,600 (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) ~~~~~ 45678 14 15 16 17 18 19 20 21 22 (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Percentage (2) Depreciation (1) (2) (1) 3 $12,600 (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Percentage (2) Depreciation (1) (2) (1) 4 $12,600 Using the bonus depreciation method, complete the depreciation schedule for the asset below: Using the bonus depreciation method, complete the depreciation schedule for the asset below: (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Depreciation (1) x (2) (1) $12,600 Percentage (2) (Round the percentage to the nearest integer and the depreciation to the nearest dollar.) Depreciation Schedule Cost Year Percentage (2) Depreciation (1) (2) (1) 2-4 $12,600 Which method do you think Sosa should choose and why? (Select the best choice below.) n Which method do you think Sosa should choose and why? (Select the best choice below.) OA. Sosa should choose bonus depreciation because it accelerates the depreciation deductions and hence the tax savings associated with those deductions. B. Sosa should choose MACRS depreciation because it diminishes the depreciation deductions and hence accelerates the tax savings associated with those deductions. OC. Sosa should choose bonus depreciation because it diminishes the depreciation deductions and hence accelerates the tax savings associated with those deductions. OD. Sosa should choose MACRS depreciation because it accelerates the depreciation deductions and hence the tax savings
