Griffith delivery service purchased a delivery truck for

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Griffith Delivery Service purchased a delivery truck for $33,600. The truck has an estimated useful life of six years and no salvage value. For the purpose financial statements, Griffith is planning to use straight-line depreciation. For tax purposes, Griffith follows MACRS, Depreciation expense using MACRS is $6,720 in Year 1, $10,750 in Year 2, $6,450 in year 3, $3,870 in each of Years 4 and 5, and $1,940 in Year 6.

Required

1. What is the difference between straight-line and MACRS depreciation expense for each of the six years?

2. Griffith's president has asked why you have used one method for the books and another for calculating taxes. "Can you do this? Is it legal? Don't we take the same total depreciation either way?" he asked. Write a brief memo answering his question and explaining the benefits of using two methods for depreciation.

Reference no: EM13357437

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