Question:
In January 20XX, Jim purchased $350,000 of new MACRS (Modified Accelerated Cost Recovery System) 5-year property in the United States. This equipment was placed in service May 1, 20XX.
Jim wants to take as much depreciation in 20XX as possible.
1. Calculate the depreciation for 20XX.
2. If Jim had been located in a qualified enterprise zone, what would be the depreciation amount?
3. Explain the depreciation method you used. In addition, include the tax benefits(saving) for the first year and present year value of the total tax benefits for the entire-5 year period.
Discuss how the tax benefits and present value would change if a different method of depreciation was used. Also, discuss when Jim would not choose to take as much depreciation as possible.
Note: Two papers are needed. Narrative is on word including explanation of depreciation, and depreciation and all calculations should be on Excel.