t the beginning of the fiscal year, G&J Company acquired new equipment at a cost of $100,000. The equipment has an estimated life of five years and an estimated salvage value of $10,000. (a) Determine the annual depreciation (for financial reporting) for each of the five years of estimated useful life of the equipment, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by using

(a.1) the straightline method and

(a.2) the double decliningbalance method.

(b) Determine the annual depreciation for tax purposes, assuming that the equipment falls into the sevenyear MACRS property class.

(c) Assume that the equipment was depreciated under MACRS for a sevenyear property class. In the first month of the fourth year, the equipment was traded in for similar equipment priced at $112,000. The tradein allowance on the old equipment was $20,000, and cash was paid for the balance. What is the cost basis of the new equipment for computing the amount of depreciation for incometax purposes?