Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment, which has a useful life of four years. Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1 - 50%, year 2 - 30%, year 3 - 15% and year 4 - 5%. In 2011 Plaxo purchases a piece of equipment with a four-year life and an original cost of $100,000. Discuss how this transaction will affect Plaxo's income taxes in 2011.

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The Answer of Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment, which has a useful life of four years. Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1 - 50%, year 2 - 30%, year 3 - 15% and year 4 - 5%. In 2011 Plaxo purchases a piece of equipment with a four-year life and an original cost of $100,000. Discuss how this transaction will affect Plaxo's income taxes in 2011.

Plaxo Corporation Has a Tax Rate of 35% and Uses