Income before depreciation and taxes amounts to $200,000.Using straight-line depreciation,the current year's depreciation expense will be $13,500.Using double-declining-balance depreciation,the current year's depreciation expense will be $19,500.Assuming a tax rate of 30%,what is the net cash saved in income taxes by using double-declining-balance depreciation over straight-line depreciation?

Question

Quizplus · Accepted Answer

Difference in depreciation = $19,500 - $13,500 = $6,000
$6,000 × 30% = $1,800 savings

Income Before Depreciation and Taxes Amounts to $200,000