Question

The following financial information applied to your company for 2018:

• Sales revenues, $4,350,000 • Labor and materials, $970,000
• Depreciation for existing assets purchased prior to 2018, $80,000
• On January 5, 2018, you purchased $130,000 of equipment classified as 5-year MACRS assets
• On September 23, 2018, you purchased $210,000 of equipment classified as 7-year MACRS assets

a) Calculate the total depreciation expenses allowed in 2018.
b) Calculate the taxes your company owes for 2018 and your net income for 2018.

Answer 1

a) fiscal-year depreciation 136,009

b) fiscal year taxable income 3,243,991

Step-by-step explanation:

fiscal-year depreciation:

The MACRS (Modified Accelerated Cost Recovery System) always use alf-year convention

for the 5-year class:

130,000 x 20% = 26,000

for the 7-years class:

210,000 x 14.29% = 30,009

previous year assets: 80,000

total depreciation: 136.009

taxale income:

sales revenues 4,350,000

operating expense (970,000)

depreciaiton expense (136, 009)

net income: 3,243,991