Infinity Production Acquired a New Machine at the Beginning of the Current

question 2

Multiple Choice

Infinity Production acquired a new machine at the beginning of the current year. The machine cost $840,000 with no residual value expected. Infinity uses the straight-line method for financial reporting, assuming a 6-year useful life. The firm classifies the equipment as 5-year MACRS property for tax purposes using the following percentages. $\begin{array}{ll}\text { Year }& \text { MACRS }(\%) \\1 & 20.00 \% \\2 & 32.00 \\3 & 19.20 \\4 & 11.52 \\5 & 11.52 \\6 & 5.76\end{array}$
The company is subject to a 30% income tax rate and has no other book-tax differences. Income before depreciation and tax is presented below:
$\begin{array}{cc}&\text {Income before}\\&\text {Tax and}\\\text { Year } & \text { Depreciation } \\\hline 1 & \$ 410,000 \\2& 460,000 \\3& 530,000 \\4 & 700,000 \\5 & 820,000 \\6& 950,000\end{array}$
What is Infinity's taxable income for year 1?

• A) $265,000
• B) $270,000
• C) $242,000
• D) $410,000

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Definitions:

Civil Service Commission

A government body charged with overseeing the hiring and management of federal government employees to ensure a merit-based, non-partisan civil service.

Pendleton Act

Legislation passed in 1883 that established the United States Civil Service Commission, which ended the spoils system and made merit the basis for hiring and promoting in the federal service.

Merit System

An approach to hiring and promoting government employees based on their ability and performance rather than political connections or factors.

Political Appointment System

A system where government officials are appointed based on their political affiliations and loyalty rather than merit or competitive examination.