Replacement HW Problem

1
Depreciation HW Problems
A company in the 39 marginal tax bracket
purchased and installed MACRS Class 7 equipment
with the following data 1st Cost 12
000 Salvage _at_ 8 years 2 000 1.) Compute
the depreciation and book values for years 1
through 8, and put them into a table for each of
the following depreciation methods a.)
Straight Line Depreciation. b.) Double
Declining Balance. c.) Sum of Years
Digits. d.) MACRS Depreciation. 2.) If the
equipment is sold for 3 000 on December 31st
of Year 4, compute the tax effect for that year
(how much tax is owed or refunded). 3.) If the
equipment is sold for 3 000 on January 1st of
Year 5, compute the tax effect for that year (how
much tax is owed or refunded).
2
ATCF HW Problem
4.) A company in the 34 marginal tax bracket
purchased and installed a new process 1 year ago
for 22 000. This year, the process produced 40
000 parts that were sold for 8.25 each. The
material costs for each one were 1.85. For the
same year, the operator was paid 17.65/hour
(with benefits) and worked 2040 hours of straight
time and the processing equipment required 880
of maintenance. To purchase the MACRS Class 3
equipment, a loan payment of 9 158 was made,
and 7 300 of that payment went towards the
principal. a.) Compute and construct the
information for the Net Profit Statement for the
past year (Year 2), including Net Income (before
tax). b.) Compute the After Tax Cash Flow
for the same year. c.) If the processing
equipment is sold for 3 000 on Jan.1 of the 3rd
Year, how much money from the sale will they pay
in taxes?