Grazie Company uses straightline depreciation for financial

Grazie Company uses straight-line depreciation for financial accounting and accelerated depreciation for tax accounting. There is no salvage value used for either book or tax purposes. The company purchased equipment for $110,000 and depreciated it over four years for book purposes ($110,000/4 years $27,500 per year). For tax purposes, the asset depreciates for three years: $50,000 the first year and S30,000 in each of the following two years. Thus, the total depreciation under both systems is $110,000. Determine the book carrying value and the tax basis of the asset over its four-year useful life. Straight-line Depreciation Expense per Books Accumulated Depreciation per Books Carrying Value per Book:s Year Total

Solution

Year Straight-line depreciation Accumulated depreciation Carrying value 1 27500 27500 82500 2 27500 55000 55000 3 27500 82500 27500 4 27500 110000 0 Total 110000