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Problem - Book versus Tax Depreciation - 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 purposes of preparing 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 use one method for the books and another for tax calculations. ''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 questions and explaining the benefits of using two methods for depreciation.
Summerdahl Resort’s common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00), and the dividend is expected to grow at a constant rate of 5% a year. What is its c..
The records of Coppell Sports showed the info. On July 1, Year 4, the machine was sold for $20,000. How much is the gain or loss on disposal?
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On 1/1/14, P. Inc. acquired 70% of the outstanding shares of S. Comp. for $1141000 in cash. The price paid was proportionate to S's total fair value; although at the date of acquisition S. had a total book value of $1380000. Prepare a schedule showin..
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If you wanted to perform an analytical procedure to check the suspected occurrence of this double counting scheme, what ratio would you calculate?
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