8. A certain asset was purchased at a cost of $1,140,000. This company is in the

Question

8.   A certain asset was purchased at a cost of $1,140,000.  This company is in the 35% tax bracket.  Complete the lines below:

Year           MACRS %      Amount of Dep        Amount of Dep                 Difference                           Tax Effect

under MACRS         under straight line

1           .3333                      ______________           ________________                     

2           .4444                      ______________           ________________          ______________           ______________

3           .1482                      ______________           ________________                     

4           .0741                      ______________

Explanation / Answer

Asset Cost= 1,140,000 Depreciation = MACRS rate * asset cost Difference in tax effect= Tax rate *Depreciation= 0.35 * Depreciation Year MACRS% Amount of Depreciation Difference in tax effect 1 0.3333 379962.00 132986.70 2 0.4444 506616.00 177315.60 3 0.1482 168948.00 59131.80 4 0.0741 84474.00 29565.90

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