Question

New Belgium purchased a nifty machine that allows them to sell draft beer in a can rather than a growler (a crowler machine) in 2015 for $385,000. The machine is expected to last for 5 years, but the asset falls into the MACRS 3-year class for depreciation purposes.

One of the benefits of New Belgium's purchase of the crowler machine is:

A. a reduction in gross income
B. a lower tax bill
C. a higher net income
D. all of the above

Answer 1

Since the asset has been been reclassified into MACRS 3- year class for depreciation purpose.

So it will be bound to deduct a larger rate of depreciation because it has to be depreciated in a shorter span of life, so this will result into lower gross income and since the depreciation would be reimbursed because it was charged at a higher rate the tax would be low, and it will impact through increase in overall net income so all the given three statements are true.

So,the correct answer would be option(D) all of the above