Martindale Motors purchased a machine that will help diagnose problems with engines that are used in its production department. The machine was purchased on January 1, 2017 at a cost of $210,000. A residual value of $10,000 was estimated. The expected useful life is 5 years. In 2017, Martindale Motors has a gross profit of $400,000 and operating expenses of $180,000. The tax rate is 35%.
Required:
1. Compute the depreciation expense for 2017 under both the straight-line and double-declining-balance depreciation methods.
2. What is the net cash saved if the accelerated depreciation method is used in 2017?

Question

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The Answer of Martindale Motors purchased a machine that will help diagnose problems with engines that are used in its production department. The machine was purchased on January 1, 2017 at a cost of $210,000. A residual value of $10,000 was estimated. The expected useful life is 5 years. In 2017, Martindale Motors has a gross profit of $400,000 and operating expenses of $180,000. The tax rate is 35%.
Required:
1. Compute the depreciation expense for 2017 under both the straight-line and double-declining-balance depreciation methods.
2. What is the net cash saved if the accelerated depreciation method is used in 2017?

Martindale Motors Purchased a Machine That Will Help Diagnose Problems