A New Zealand business has a taxation balance date of 31 March. On the 30 January this year the business purchased a new asset for $63465. Installation costs were $12134. The allowable straight-line depreciation rate is 15.4% per annum for tax purposes. What is the maximum depreciation the business will be able to claim in its tax return this year? (The allowed rounding error for this question is within 1%. Please round your answer to the nearest dollar but exclude $ and , when typing your answer.)
Question
A New Zealand business has a taxation balance date of 31 March. On the 30 January this year the business purchased a new asset for 12134. The allowable straight-line depreciation rate is 15.4% per annum for tax purposes. What is the maximum depreciation the business will be able to claim in its tax return this year? (The allowed rounding error for this question is within 1%. Please round your answer to the nearest dollar but exclude $ and , when typing your answer.)
Solution
To calculate the maximum depreciation the business can claim in its tax return this year, follow these steps:
-
First, add the cost of the asset to the installation costs to get the total cost. 12134 (installation costs) = $75599 (total cost)
-
Next, calculate the depreciation for a full year by multiplying the total cost by the depreciation rate. 11642.26 (full year depreciation)
-
However, the asset was not in use for the full year. It was purchased on January 30 and the tax year ends on March 31. This is a period of 2 months (February and March).
-
To calculate the depreciation for this period, divide the full year depreciation by 12 (to get the monthly depreciation) and then multiply by 2 (for the two months the asset was in use). (1937.04
-
Round this to the nearest dollar to get the maximum depreciation the business can claim in its tax return this year. The maximum depreciation is $1937.
Similar Questions
Multiple Choice QuestionAssume straight-line depreciation. A company plans to purchase machinery costing $1,000,000 with salvage value of $200,000 after 4 years. Annual income is expected to be $40,000 during the 4 years. Calculate the accounting rate of return. Round your answer to the nearest tenth of a percent.Multiple choice question.6.7%15.0%13.3%5.0%
A company purchases machinery for $100,000 with an estimated useful life of 5 years and no residual value. If the company uses the straight-line depreciation method, what is the annual depreciation expense?(5 Points)$10,000$20,000$25,000$30,000
Machinery is purchased for $140,000. It is estimated that it has a useful life of 5 years and a residual value of $20,000. Using the straight-line method, calculate the amount of annual depreciation to be charged.$28,000$14,000$24,000$12,000
A machine is purchased for $60 000. It is estimated that it has a useful life of 5 years and will then be sold for $5000. Using the straight-line method, calculate the amount of depreciation to be charged for each year of useful life.Group of answer choices$5000$12 000$0$11 000
You plan to enhance your company's technology infrastructure by investing $57,000 in a new software system. This software will be depreciated using the straight-line method over 8 years to a terminal book value of 4,000. Given your firm's marginal corporate tax rate of 29%, what is the value of the software's depreciation tax shield in the first year of operation?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.