TUTUUS dldlce SCL ACCOU e 5.1: Jefferson Imaging Clinic cept: Understanding depreciation and deferred taxes Key concept: Unda medical office computerized interpretation. The digital images along he Jefferson Imaging Clinic Inc., a for-profit entity that is taxed as a C corpora- tion, was started three years ago by James Jefferson, MD, to provide fast, low-cost imaging services for patients in a large metropolitan area. The clinic is located in a office park and provides both imaging-via fluoroscopy, projectional radiographs, terized tomography (CT), and magnetic resonance imaging (MRI) and image tation. The clinic has state-of-the-art computer capabilities and can transmit the images along with the image interpretation to local doctors when requested. The imaging equipment was all acquired during the first month of the clinic's ions at a total cost of $2,000,000. For financial reporting purposes, the equip or is being depreciated over five years using the straight-line method with no expected ce value. For tax purposes, the equipment is being depreciated using the Internal e Service's Modified Accelerated Cost Recovery System (MACRS) rates, which operations at a are as follows: Year Yearly Rate .200 320 .192 .115 .115 .058 Total 100.000 These MACRS rates are based on the double-declining balance depreciation method, five-year life, and they incorporate the half-year convention for the first year. Assignments and Questions Compute the yearly depreciation using the straight-line method, 2. Compute the yearly depreciation using the MACRS method. 3. Compute the yearly book-tax depreciation differences between the two methode 4. What is the net difference in depreciation over the six-year period? Assuming that year net income before depreciation is $800,000 and the effec- rive income tax rate is 30 percent, record the entry for income tax expense to Year 1. Assuming that Year 2 net income before depreciation is $800,000 and the effec- tive income tax rate is 30 percent, record the entry for income tax expense for Year 2. 7. Assuming that Year 5 net income before depreciation is $800,000 and the effec- tive income tax rate is 30 percent, record the entry for income tax expense for Year 5. 8. What is the overall six-year financial effect from the government providing the MACRS option for income tax purposes? llowed 100 per rovided if the government allow 9. What business advantage would Fof equipment ost to be deducted in the year purchased