HW9SOL - Homework #9 - Solution 12.3 (a, b) Tax...

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Homework #9 - Solution 12.3 (a, b) Tax depreciation: D t = Rate(BV t-1 ) Book depreciation: D t = Rate(40,000) Tax Book Year Depr BV Depr BV 0 40,000 40,000 1 16,000 24,000 10,000 30,000 2 9,600 14,400 10,000 20,000 3 5,760 8,640 10,000 10,000 4 3,456 5,184 10,000 0 A spreadsheet solution with graphs follows. 12.7 Book: D t = (150,000 – 25,000)/9.5 = $13,158 per year Tax: D t = (150,000 – 0)5 = $ 30,000 per year Spreadsheet solution uses SL depreciation for book and tax purposes to plot BV.
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12.10 The DDB salvage amount is calculated using d = 0.4. BV 5 = B(1-d) t = 500,000(.6) 5 = $38,880 Considerably less than the estimated S = $50,000. For 150% DB, implied salvage is calculated using d = 0.3. BV 5 = 500,000(.7) 5 = $84,035 Considerably more than the estimated S = $50,000. 12.14 (a) DDB: d = 2/12 = 0.1667 BV 12 = B(1-d) 12 = 180,000(1-0.1667) 12 = $20,188 150% DB: d = 1.5(1/12) = 0.125 BV 12 = 180,000(1-0.125) 12 = $36,255 (b) S = $30,000 is between the two implied salvages. (c) DDB: writes off more since all $150,000 is depreciated. 150% DB: writes off less since it will stops at BV 12 = $36,255 12.16 Select any first cost value to use for B. The spreadsheet below uses $10,000. DDB: d = 2/5 = 0.4 125% DB: d = 1.25/5 = 0.25 DDB accumulates percentage faster and more in total than 125% DB. 12.23 (a) MACRS: rate for year 3 is 0.1440; sum of rates for 3 years is 0.4240. D 3 = 0.1440(800,000) = $115,200 BV 3 = 800,000 – 0.4240(800,000) = $460,800 (b) DDB: d = 2/15 = 0.13333 D 3 = 0.13333(800,000)(1-0.13333) 2 = $80,117 BV 3 = 800,000(1-0.1333) 3 = $520,776
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(c) ADS SL: d = 1/15 = 0.06666 years 2 through 15; ½ that for years 1 and 16. D
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This note was uploaded on 03/24/2011 for the course ISEN 302 taught by Professor Ko during the Spring '08 term at Texas A&M.

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HW9SOL - Homework #9 - Solution 12.3 (a, b) Tax...

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