Use the Following Information for Questions

question 54

Short Answer

Use the following information for questions.
At the beginning of 2012, Pitman Co.purchased an asset for $600,000 with an estimated useful life of 5 years and an estimated residual value of $50,000.For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used.Pitman Co.'s tax rate is 40% for 2012 and all future years.
-At the end of 2012, what is the book basis and the tax basis of the asset?

---

Definitions:

Equilibrium Interest Rate

The interest rate at which the demand for funds equals the supply of funds in the market, bringing the financial market into balance.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good that suppliers are willing and able to sell, generally depicted as upward sloping.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded.

Nominal Interest Rate

The stated interest rate on a loan or investment, not adjusted for inflation.