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Q1) Your law office requires a new copying machine, and you are considering two alternatives:

A. Buying new copying machine: in this case, you will pay today $7,000. Annual expenses (maintenance and insurance) will be $700 and additionally you evaluate that cost per copy will be $0.3. Copying machine life span is 5 years and with straight line depreciation and no terminal value.

B. Lease copying machine: in this case, you will pay fix amount of $2,200 year plus $0.4 per copy.

Law office tax rate is 35% and its discount rate is must buy machine instead of leasing it?

How will your reply change if law office will have accelerated depreciation of 2 years (meaning each year it can deduct 50% of machine cost)?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M920014

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