On October 26, 1998, Atlantic Iron Works acquired new machinery at a cost of $50,000. The...
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On October 26, 1998, Atlantic Iron Works acquired new machinery at a cost of $50,000. The ma- chinery has an estimated useful life of 5 years, with a residual value of $20,000. For income tax purposes, this machinery qualifies as 3-year property. Instructions a. Compute the annual depreciation expense for each year using each of the two depreciation methods listed below. Because you will record depreciation for only a fraction of a year in 1998, the straight-line depreciation schedule will extend to the year 2003. 1. Straight-line, using the half-year convention 2. MACRS, the method Atlantic uses in its income tax returns b. In this situation, would it be appropriate for Atlantic Iron to use MACRS in its financial state- ments as well as in its income tax returns? Explain the reasoning behind your answer. On October 26, 1998, Atlantic Iron Works acquired new machinery at a cost of $50,000. The ma- chinery has an estimated useful life of 5 years, with a residual value of $20,000. For income tax purposes, this machinery qualifies as 3-year property. Instructions a. Compute the annual depreciation expense for each year using each of the two depreciation methods listed below. Because you will record depreciation for only a fraction of a year in 1998, the straight-line depreciation schedule will extend to the year 2003. 1. Straight-line, using the half-year convention 2. MACRS, the method Atlantic uses in its income tax returns b. In this situation, would it be appropriate for Atlantic Iron to use MACRS in its financial state- ments as well as in its income tax returns? Explain the reasoning behind your answer.
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Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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