Sunrise, Inc., bought a machine for $80,000 on January 2, 2010. Management expects to use the machine for eight years, at the end of which time, it will have a $20,000 salvage value. Consider the following questions independently.
(a) If Sunrise uses straight-line depreciation, what will be the book value of the machine on December 31, 2012?
(b) If Sunrise uses double-declining-balance depreciation, what will be the depreciation expense for 2012?
(c) If Sunrise uses double-declining-balance depreciation, followed by switching to straight-line depreciation, when will be the optimal time to switch?
(d) If Sunrise uses a seven-year MACRS and sells the machine on April 1, 2013 at a price of $38,000, what will be the taxable gains?