Question

Cordet's Café has a potential investment of $900,000, which generated a depreciation tax shield of $60,000 and a tax rate of 25% for 2009. How much depreciation expense did Cordet's Café record during 2009?A)$15,000 B)$80,000 C)$240,000 D)$225,000

Answer 1

Answer:

The correct answer to the following question is C) $240,000 .

Explanation:

The given information -

Potential investment = $900,000

Depreciation tax shield  = $60,000

Tax rate = 25%

The amount of depreciation expenses recorded by cordet's cafe would be -

Potential investment x Tax rate  + Depreciation tax shield x Tax rate

= $900,000 x 25% + $60,000 x 25%

= $225,000 + $15,000

= $240,000