Calculate the amount of tax depreciation

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Question - The ABC Company bought a new machine on October 1, 2014 for $110,000. It planned to keep the truck for four years at which time it expected to sell the truck for $30,000. The company elected to amortize the truck for financial reporting purposes using the declining balance method with an annual rate of 30%. The company has a December 31 year-end and a corporate income tax rate of 40%. For tax reporting purposes, you may pick one of the following:

The company US-based and is required to determine tax depreciation for reporting to the taxation authority using the MACRS 10-year category, or

The company is Canadian-based and is required to determine capital cost allowance for reporting to the taxation using a CCA pool rate of 20%.

Required - Calculate the following for both the years 2014 and 2015:

A. The depreciation expense for the truck that would be shown on the company's income statement

B. The amount of tax depreciation (US) or CCA (Canada) that would be claimed and

C. The change in deferred taxes.

Reference no: EM132697591

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