Griffith Delivery Services purchased a delivery truck for $33,600. The truck has an estimated useful life oif six years and no salvage value. For purposes of preparing financial statements, Griffith is planning to use straight-line depreciation. For tax purposes, Griffith follow MACRS. Depreciation expense using MACRS is $6,720 in year 1, $10,750 in year 2, $6450 in year 3, $3,870 in years 4 and 5, and $1,940 in year 6
1. What is the difference between straight line and MACRS depreciated expense for each of the six year?
2. Griffiths president has asked why you use one method for the books and another for tax calculations. "can you do this? Is it legal? Don't we take the same total depreciation either way?" he asked. Write a brief memo answering his question and explaining the benefits of using two methods for depreciation.