Chrysler Corporation purchased special tools to be used in the assembly process of the Mustang in the amount of $7,200,000. The residual value after 3 years was estimated to be $900,000. They used the straight-line method of depreciation for financial statement reporting and MACRS for the amount of depreciation reported to the IRS.
A)Which method of depreciation resulted in the largest write-off in the first year?
B)How much greater was the write-off using your answer to (a) above?

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The Answer of Chrysler Corporation purchased special tools to be used in the assembly process of the Mustang in the amount of $7,200,000. The residual value after 3 years was estimated to be $900,000. They used the straight-line method of depreciation for financial statement reporting and MACRS for the amount of depreciation reported to the IRS.

Chrysler Corporation Purchased Special Tools to Be Used in the Assembly