Martin Motors Purchased a Machine That Will Help Diagnose Problems

question 145

Essay

Martin Motors purchased a machine that will help diagnose problems with engines. The machine cost $210,000 on January 10, 2012 and a residual value of $10,000 was anticipated, with a useful life of 5 years.
In 2012, Martin Motors has a gross profit of $400,000 and operating expenses of $180,000.
A) Martin Motors has a tax rate of 35%. Compute the deprecation for 2012 under both the straight-line and double-declining balance method.
B) Which depreciation method, straight-line or accelerated method, should Martin Motors use for tax purposes? What is the net cash saved between the 2 methods?

• A) Martin Motors has a tax rate of 35%. Compute the deprecation for 2012 under both the straight-line and double-declining balance method.
• B) Which depreciation method, straight-line or accelerated method, should Martin Motors use for tax purposes? What is the net cash saved between the 2 methods?

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