Wildhorse Company manufactures routers used in industrial modems. On May 15, 2017, Wildhorse purchased a precision welding machine at a retail price of $112,800. Wildhorse paid 5% sales tax on this purchase and hired a contractor to build a "clean" platform enclosure for the machine for $8,550. Wildhorse estimates the machine will have a 5-year useful life, with a salvage value of $9,400 at the end of 5 years. Wildhorse uses straight-line depreciation and employs the "half-year" convention in accounting for partial-year depreciation. Wildhorse's fiscal year ends on December 31. (a) Your answer is incorrect. At what amount should Wildhorse record the acquisition cost of the machine? Acquisition cost of the machine 2$

Wildhorse Company manufactures routers used in industrial modems. On May 15, 2017, Wildhorse purchased a precision welding machine at a retail price of $112,800. Wildhorse paid 5% sales tax on this purchase and hired a contractor to build a "clean" platform enclosure for the machine for $8,550. Wildhorse estimates the machine will have a 5-year useful life, with a salvage value of $9,400 at the end of 5 years. Wildhorse uses straight-line depreciation and employs the "half-year" convention in accounting for partial-year depreciation. Wildhorse's fiscal year ends on December 31. (a) Your answer is incorrect. At what amount should Wildhorse record the acquisition cost of the machine? Acquisition cost of the machine 2$

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Description: Wildhorse Company manufactures routers used in industrial modems. On May 15, 2017, Wildhorse purchased a precision weldingmachine at a retail price of $112,800. Wildhorse paid 5% sales tax on this purchase and hired a contractor to build a "clean" p

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 4PROB

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Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. He asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half years depreciation should be computed for 2014 and 2019. Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tims consideration in the selection of a depreciation method?
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