DDB over 5 years (not tax) End of year basis year 1 40.00% 60.00% year 2...

 

Transcribed Image Text:

DDB over 5 years (not tax) End of year basis year 1 40.00% 60.00% year 2 24.00% 36.00% year 3 14.40% 21.60% year 4 8.64% 12.96% year 5 12.96% 0.00% Total 100.00% Questions: (these are not tax questions. Instead, these are critical thinking questions that will enable you to later appreciate the logic of MACRS) 1. Do you see something conceptually wrong with this table? In other words, the logic of accelerated depreciation is that we derive greater benefits from the asset in early years. According to that logic, what is wrong with this schedule? 2. Can you propose a solution or modification to the DDB depreciation schedule that would solve the problem you identified in question 1, but would still largely follow the DDB approach? DDB over 5 years (not tax) End of year basis year 1 40.00% 60.00% year 2 24.00% 36.00% year 3 14.40% 21.60% year 4 8.64% 12.96% year 5 12.96% 0.00% Total 100.00% Questions: (these are not tax questions. Instead, these are critical thinking questions that will enable you to later appreciate the logic of MACRS) 1. Do you see something conceptually wrong with this table? In other words, the logic of accelerated depreciation is that we derive greater benefits from the asset in early years. According to that logic, what is wrong with this schedule? 2. Can you propose a solution or modification to the DDB depreciation schedule that would solve the problem you identified in question 1, but would still largely follow the DDB approach?

Answer rating: 100% (QA)

Answer 1 The concept of accelerated depreciation is being violated in this question As the r... View the full answer