Income before depreciation and taxes amounts to $200,000.Using straight-line depreciation,the current year's depreciation expense will be $30,000.Using double-declining-balance depreciation,the current year's depreciation expense will be $50,000.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?

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Quizplus · Accepted Answer

The net cash saved in income taxes by using double-declining-balance depreciation over straight-line depreciation is $6,000. This is because the double-declining-balance depreciation expense is $50,000, which is $20,000 more than the straight-line depreciation expense of $30,000. This $20,000 difference reduces the taxable income by $20,000, which results in a tax savings of $6,000 (30% x $20,000).

Income Before Depreciation and Taxes Amounts to $200,000