Income taxes over the life of the equipment

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Reference no: EM131810310

ARKO oil company purchased two large compressors for $125,000 each. One compressor was installed in the firm's Texas refinery and is being depreciated by MACRS depreciation. The other compressor was placed in the Oklahoma refinery, where it is being depreciated by sum-of-years'-digits depreciation with zero salvage value. Assume the company pays federal income taxes each year and the tax rate is constant. The corporate accounting department noted that the two compressors are being depreciated differently and wonders whether the corporation will wind up paying more income taxes over the life of the equipment as a result of this. What do you tell them?

Reference no: EM131810310

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