A plant manager for a fiber optics cable
Chapter 16, Problem 16.34(choose chapter or problem)
A plant manager for a fiber optics cable manufacturingcompany knows that the remaining capitalinvestment in several types of equipment is moreclosely approximated when the equipment is depreciatedlinearly by the SL method compared to arapid write-off method like MACRS. Therefore, hekeeps two sets of books, one for tax purposes(MACRS) and one for equipment-managementpurposes (SL). For an asset that has a first cost of$80,000, a depreciable life of 5 years, and a salvagevalue equal to 25% of the first cost, determinethe difference in the book values shown in the twosets of books at the end of year 3. Which methodhas the lower book value and by how much?
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