Abbott placed into service a flexible manufacturing cell costing $820,000 early this year for production of their analytical testing equipment. Gross income due to the cell is expected to be $780,000 with deductible expenses of $475,000. Depreciation is based on MACRS-GDS, and the cell is in the 7-year property class, calling for a depreciation percentage of 14.29%, or $117,178, in the 1st year. Half of the cell cost is financed at 11% with principal paid back in equal amounts over 5 years. The 1st year's interest is therefore $45,100, while the principal payment is $82,000. a. Determine the taxable income for the 1st year. $ b. Determine the tax paid due to the cell during the 1st year using a 25% marginal tax rate. $ c. Determine the after-tax cash flow for the 1st year. $

Abbott placed into service a flexible manufacturing cell costing $820,000 early this year for production of their analytical testing equipment. Gross income due to the cell is expected to be $780,000 with deductible expenses of $475,000. Depreciation is based on MACRS-GDS, and the cell is in the 7-year property class, calling for a depreciation percentage of 14.29%, or $117,178, in the 1st year. Half of the cell cost is financed at 11% with principal paid back in equal amounts over 5 years. The 1st year's interest is therefore $45,100, while the principal payment is $82,000. a. Determine the taxable income for the 1st year. $ b. Determine the tax paid due to the cell during the 1st year using a 25% marginal tax rate. $ c. Determine the after-tax cash flow for the 1st year. $

Name: Abbott placed into service a flexible manufacturing cell costing $820
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Description: Abbott placed into service a flexible manufacturing cell costing $820,000 early this year for production of theiranalytical testing equipment. Gross income due to the cell is expected to be $780,000 with deductible expenses of$475,000. Depreciation

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 13P

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