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Plastic Recycling Company is just starting operations with new equipment costing $30,000 and a useful life of five years. At the end of five years the equipment probably can be sold for $5,000. The company is concerned with its cash flow and wants a comparison of straight-line and MACRS1 depreciation to help management decide which depreciation method to use for financial statements and for its income tax return. Assume a 40 percent tax rate.
Modified Accelerated Cost Recovery System (effective for assets placed in use after December 31, 1986.)
Required:
a. Calculate the difference in taxable income and cash inflow under each method. Assume MACRS allowances are 20, 32, 18, 15, and 15 percent for years 1-5 respectively.
b. Which deprecation method is preferable for tax purposes? Why?
Select the one journal entry that properly presents the application of factory overhead to work in process if the driver is drop-forge strokes and the rate is $1.75 per stroke and the meter read 1,780 at the start of the day and 2890 at the end of..
Can you think of an instance when a capital project projection might satisfy the hurdle-rate requirements, but the project would be rejected anyway? What other criteria impact the decision?
An imaging center has the following information: Compute the total dollar contribution margin dollars and percentage.
Deduce extant problems with interim reporting and authoritative positions of the issues, and make recommendations you believe would help further resolve the problems. Provide specific examples to support your response.
The finished goods inventory on hand at the end of each month must be equal to 5,000 units plus 25 percent of the next month's sales. The finished goods inventory on June 30 is budgeted to be 13,750 units.
Jewelry stores want to provide their customers with the highest quality of diamonds available at the lowest possible prices. Unfortunately, the lowest priced diamonds these days are sold by African rebels who use the profits to engage in genocide.
Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured and bad debt losses cannot be reasonably predicted.
Which of the following would not indicate possible asset impairment?
Traded the old company equipment for a new truck issuing a check to complete the transaction. The old used truck cost $3,800 and on September 30, the end of the quarter, had depreciated $2,200.
Maria Alvarez is investing $370,700 in a fund that earns 11% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 21 years?
The T&M company wants to expand internationally. The marketing department suggests starting with specialty stores in Italy since a survey indicates that American quality towels are appreciated in Italy. The current price is about 20% higher than c..
What is Farr Company's accounts receivable balance at December 31, 2010?
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