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Why would a business select an accelerated method of depreciation for tax​ purposes?

a. Accelerated depreciation generates higher depreciation expenses immediately and therefore lower tax payments in the early years of the asset's life.
 
b. MACRS depreciation follows a specific pattern of depreciation.
 
c. Accelerated depreciation is easier to calculate because salvage value is ignored.
 
d. Accelerated depreciation generates a greater amount of depreciation over the life of the asset than does straight-line depreciation.

 

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Patrina Schowalter
Patrina SchowalterLv2
14 May 2020

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11. Straight-line depreciation A) results in higher net income numbers in early years than accelerated methods. results in higher expense in early years than accelerated methods. C) results in less total depreciation during the entire life of an asset than accelerated methods. results in a lower tax burden in early years. B) D)

25.Which of the following items does not affect the calculation of depreciation expense?

A.Economic benefits generated by the asset

B.Useful life of the asset

C.Residual value of the asset

D.Capitalized cost of the asset

26.Which of the following statements is correct when the straight-line method is used to compute depreciation?

A.The carrying value of an asset is a constant amount during the asset's useful life

B.Accumulated depreciation is a constant amount during the asset's estimated useful life

C.Depreciation Expense is a constant amount each year

D.The book value of an asset is an increasing amount during the asset's useful life

27.One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

A.reduces book value below residual value.

B.does not consider the useful life of the asset in the calculation of depreciation.

C.cannot be used for tax purposes.

D.uses book value instead of depreciable cost in the calculation of depreciation.

28.Why don't all companies use the same depreciation method?

A.US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes.

B.Different depreciation methods might better reflect the pattern in which assets' economic benefits are used.

C.All companies do use the same depreciation method.

D.Only large companies are allowed to use some of the more complicated depreciation methods.

On December 31, 2017, before the books were closed, themanagement and accountants of Marigold Inc. made the followingdeterminations about three pieces of equipment.

1. Equipment A was purchased January 2, 2014. It originally cost$545,000 and, for depreciation purposes, the straight-line methodwas originally chosen. The asset was originally expected to beuseful for 10 years and have a zero salvage value. In 2017, thedecision was made to change the depreciation method fromstraight-line to sum-of-the-years’-digits, and the estimatesrelating to useful life and salvage value remained unchanged.
2. Equipment B was purchased January 3, 2013. It originally cost$187,500 and, for depreciation purposes, the straight-line methodwas chosen. The asset was originally expected to be useful for 15years and have a zero residual value. In 2017, the decision wasmade to shorten the total life of this asset to 9 years and toestimate the residual value at $3,000.
3. Equipment C was purchased January 5, 2013. The asset’s originalcost was $161,000, and this amount was entirely expensed in 2013.This particular asset has a 10-year useful life and no residualvalue. The straight-line method was chosen for depreciationpurposes.


Additional data:

1. Income in 2017 before depreciation expense amounted to$400,000.
2. Depreciation expense on assets other than A, B, and C totaled$54,600 in 2017.
3. Income in 2016 was reported at $371,300.
4. Ignore all income tax effects.
5. 99,000 shares of common stock were outstanding in 2016 and2017.

Prepare all necessary entries in 2017 to record thesedeterminations

Prepare comparative retained earnings statements for MarigoldInc. for 2016 and 2017. The company had retained earnings of$200,400 at December 31, 2015.

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