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Calculate the annual difference between the cash flow and the deductibility for tax purposes for the...

Calculate the annual difference between the cash flow and the deductibility for tax purposes for the purchase of a $60,000 dump truck. The truck is depreciated using the half-year convention and 200% declining-balance. The truck is purchased outright

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Answer #1

Under The Double Declining deprecation. Depreciation Would be Twice of that of straight line method.

AS PER IRS useful life of Dump Truck is 5 years

So of straight line Depreciation = 60000/5 = 12000

Deprecation Under The Double Declining deprecation (200%) will be

Year

Depreciation

1

24000

2

24000

3

12000

In Mid year convention method if assume that asset is purchased in the middle of the year and only half deprecation would be expensed in the first year

Using Double Declining Deprecation For MID Convention

Year

Depreciation

1

12000

2

24000

3

24000

Please thumbs up, Thank you

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