Freedom Corporation acquired a fixed asset for $300,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 7% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C. TABLE 1 and Appendix C, TABLE 2) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years- digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Incremental PV of tax savings using SYD depreciation Show less
Freedom Corporation acquired a fixed asset for $300,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 7% and an income tax rate of 40%. (Use Exhibit 12.4. Appendix C. TABLE 1 and Appendix C, TABLE 2) Required: 1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years- digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Incremental PV of tax savings using SYD depreciation Show less
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles
Section: Chapter Questions
Problem 8.2P
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Transcribed Image Text:Freedom Corporation acquired a fixed asset for $300,000. Its estimated life at time of purchase was 4 years, with no estimated
salvage value. Assume a discount rate of 7% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C,
TABLE 2)
Jy
Required:
1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits
(SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate
depreciation charges.
2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance
(DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate
depreciation charges.
3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation?
The asset qualifies as a 3-year asset. Use the half-year convention.
3-4
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-
digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to
calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest
whole dollar.)
Incremental PV of tax savings using SYD depreciation
Show less
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