Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 16-48 MACRS Depreciation; Present Value of Tax Shield (Section 2) (LO 16-4, 16-5) Mind Challenge, Inc., publishes innovative science textbooks for public schools. The

image text in transcribed

Problem 16-48 MACRS Depreciation; Present Value of Tax Shield (Section 2) (LO 16-4, 16-5) Mind Challenge, Inc., publishes innovative science textbooks for public schools. The company's management recently acquired the following two new pleces of equipment. . Computer-controlled printing press cost, $276.000; considered to be industrial equipment; expected useful life, 12 years. Duplicating equipment to be used in the administrative offices: considered to be office equipment, cost, $60,900; expected useful life, six years. The company uses straight-line depreciation for book purposes and the MACRS accelerated depreciation schedule for tax purposes. The firm's tax rate is 30 percent; its after-tax hurdle rate is 10 percent. Neither machine has any salvage value. Use Appendix A and Exhibit 16-9 for your reference. (Use appropriate factor(s) from the tables provided.) Required: For each of the publishing company's new pieces of equipment: 1. Prepare a schedule of the annual depreciation expenses for book purposes. 2. Determine the appropriate MACRS property class. 3. Prepare a schedule of the annual depreciation expenses for tax purposes. 4. Compute the present value of the depreciation tax shield. Complete this question by entering your answers in the tabs below. Office Printing Press Equipment Prepare a schedule of the annual depreciation expenses for book purposes and determine the appropriate MACRS property class. (Round your "Percentage" answer to 2 decimal places (.e., .1234 should be entered as 12.34). Round your "Discount factor" to 3 decimal places. Round your final answers to whole dollar) Straight-Line Cash Flow: MACRS Depreciation Discount Present Depreciation for Tax Savings Factor Value Book Purposes Year 1 W= 2 = 3 x 4 = 4 x % = 5 x %= 6 % =

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions