Home Depot Subsidiary Equipment cost Salvage value Estimated useful life Tax Rate 100,000 10,000 21% 7-year Year 1 2 3 4 3-year 33.33% 44.45% 14.81% 7.41% Property Class 5-year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 5 6 7 8 Part A: Depreciation Expense Straight Line Depreciation Rate 1. a. Straight-line method Cost Net Book Value Depreciation Accumulated Net Book Value Year 1 Year 2 Year 3 Beginning book value Ending Book Value Year Depreciation Rate Accumulated Depreciation Depreciation Part B: Deferred Tax Liability GAAP Depreciation Add to Deferred Deferred Tax Tax Liability Liability IRS Depreciation Deferred Liability Use the following information to answer Part A and Part B of Problem 3. Home Depot Subsidiary Equipment cost Salvage value Estimated useful life Tax Rate 100,000 10,000 3 21% MACRS Depreciation Schedule Property Class 5- year Year 1 2 3 3-year 33.33% 44.45% 14.81% 7.41% 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 4 7-year 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 5 6 7 8 A) Calculate depreciation expense over the life of the asset using both straight line depreciation and MACRS Depreciation methods. B) If the company follows straight line depreciation for the financial reports prepared for the shareholders and MACRS method for the financial reports prepared for the IRS, calculate deferred tax liability over the life of the asset. C) How do you report Finance Lease and Operating Lease at the Balance Sheet under the 2019 Lease Accounting Standard? Home Depot Subsidiary Equipment cost Salvage value Estimated useful life Tax Rate 100,000 10,000 21% 7-year Year 1 2 3 4 3-year 33.33% 44.45% 14.81% 7.41% Property Class 5-year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 5 6 7 8 Part A: Depreciation Expense Straight Line Depreciation Rate 1. a. Straight-line method Cost Net Book Value Depreciation Accumulated Net Book Value Year 1 Year 2 Year 3 Beginning book value Ending Book Value Year Depreciation Rate Accumulated Depreciation Depreciation Part B: Deferred Tax Liability GAAP Depreciation Add to Deferred Deferred Tax Tax Liability Liability IRS Depreciation Deferred Liability Use the following information to answer Part A and Part B of Problem 3. Home Depot Subsidiary Equipment cost Salvage value Estimated useful life Tax Rate 100,000 10,000 3 21% MACRS Depreciation Schedule Property Class 5- year Year 1 2 3 3-year 33.33% 44.45% 14.81% 7.41% 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 4 7-year 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 5 6 7 8 A) Calculate depreciation expense over the life of the asset using both straight line depreciation and MACRS Depreciation methods. B) If the company follows straight line depreciation for the financial reports prepared for the shareholders and MACRS method for the financial reports prepared for the IRS, calculate deferred tax liability over the life of the asset. C) How do you report Finance Lease and Operating Lease at the Balance Sheet under the 2019 Lease Accounting Standard
