The following financial information applied to your company for 2018:

• Sales revenues, $4,350,000 • Labor and materials, $970,000

• Depreciation for existing assets purchased prior to 2018, $80,000

• On January 5, 2018, you purchased $130,000 of equipment classified as 5-year MACRS assets

• On September 23, 2018, you purchased $210,000 of equipment classified as 7-year MACRS assets

a) Calculate the total depreciation expenses allowed in 2018.

b) Calculate the taxes your company owes for 2018 and your net income for 2018.

Question

Business

Isabel Hinton

7 January, 22:56

The following financial information applied to your company for 2018:

• Sales revenues, $4,350,000 • Labor and materials, $970,000

• Depreciation for existing assets purchased prior to 2018, $80,000

• On January 5, 2018, you purchased $130,000 of equipment classified as 5-year MACRS assets

• On September 23, 2018, you purchased $210,000 of equipment classified as 7-year MACRS assets

a) Calculate the total depreciation expenses allowed in 2018.

b) Calculate the taxes your company owes for 2018 and your net income for 2018.

+3

Answers (1)

Know the Answer?

Deangelo Ponce · Answer 1

a) fiscal-year depreciation 136,009

b) fiscal year taxable income 3,243,991

Explanation:

fiscal-year depreciation:

The MACRS (Modified Accelerated Cost Recovery System) always use alf-year convention

for the 5-year class:

130,000 x 20% = 26,000

for the 7-years class:

210,000 x 14.29% = 30,009

previous year assets: 80,000

total depreciation: 136.009

taxale income:

sales revenues 4,350,000

operating expense (970,000)

depreciaiton expense (136, 009)

net income: 3,243,991