Answer:
Year 1
As per company book deprecation: (Equipment cost-Salvage value)/Life time = (50,000 - 5,000)/10 = 45,000/10 = $4,500
As per income tax depreciation = Cost * MACRS rate for year 1 = 50,000 * 20% = $10,000
Therefore, difference in year 1 will be: $10,000 - $4,500 = $5,500
Year 1
As per company book deprecation: (Equipment cost-Salvage value)/Life time = (50,000 - 5,000)/10 = 45,000/10 = $4,500
As per income tax depreciation = Cost * MACRS rate for year 2 = 50,000 * 32% = $16,000
Therefore, difference in year 1 will be: $16,000 - $4,500 = $11,500
