Question

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.

Answer 1

Answer:

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