The Rumpel Felt Company purchased a felt press last year at a cost of $15,000. The division manager reports that for $13,000 (including installation), a new felt press can be bought. Both machines are in Class 43 with a 30% depreciation rate. The old machine's current market value is $12,000. The new press will be used for two years and then sold for $3,500. If the old press is not replaced, then it could be sold for $3,000 in two years. What is the present value of incremental tax shields in the terminal year? The tax rate is 40% and Rumpel's cost of capital is 10%. O $1,143 O $236 $29 O $600

The Rumpel Felt Company purchased a felt press last year at a cost of $15,000. The division manager reports that for $13,000 (including installation), a new felt press can be bought. Both machines are in Class 43 with a 30% depreciation rate. The old machine's current market value is $12,000. The new press will be used for two years and then sold for $3,500. If the old press is not replaced, then it could be sold for $3,000 in two years. What is the present value of incremental tax shields in the terminal year? The tax rate is 40% and Rumpel's cost of capital is 10%. O $1,143 O $236 $29 O $600

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 7E: Loban Company purchased four cars for 9,000 each and expects that they will be sold in 3 years for...

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Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
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