What will be the book value of the machineon december

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Problem

AmSouth, Inc., bought a machine for $50,000 on January 2, 2004. Management expects touse the machine for 10 years, at the end of which time it will have a $1,000 salvage value.Consider the following questions independently:

(a) If AmSouth uses straight-line depreciation, what will be the book value of the machineon December 31, 2007?

(b) If AmSouth uses double-declining-balance depreciation, what will be the depreciationexpense for 2007?

(c) If AmSouth uses double-declining-balance depreciation, followed by switching to straightlinedepreciation, when will be the optimal time to switch?

(d) If Amsouth uses 7-year MACRS and sells the machine on April 1, 2007, at a price of$30,000, what will be the taxable gains?

Reference no: EM131790311

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