Q1) Griffith Delivery Service bought a delivery truck for $33,600. Truck has estimated useful life of six years and no salvage value. For purpose financial statements, Griffith is planning to utilize straight-line depreciation. For tax purposes, Griffith follows MACRS, Depreciation expense utilizing MACRS is $6,720 in Year 1, $10,750 in Year 2, $6,450 in year 3, $3,870 in each of Years 4 and 5, and $1,940 in Year 6.
Question:
1. Write down the difference between straight-line and MACRS depreciation expense for each of 6 years?
2. Griffith's president has asked why you have utilized one method for books and another for computing taxes. "Can you do this? Is it legal? Don't we take same total depreciation either way?" he asked. Write a short memo answering his question and dscribing benefits of using two methods for depreciation.