*E11-26B (Book vs. Tax (MACRS) Depreciation) Blue Corp. purchased computer equipment on July 1, 2014, for $21,000. The computer equipment has a useful life of 8 years and a salvage value of $1,000. For tax purposes, the MACRS class life is 5 years. Instru

*E11-26B (Book vs. Tax (MACRS) Depreciation) Blue Corp. purchased computer equipment on July 1, 2014, for $21,000. The computer equipment has a useful life of 8 years and a salvage value of $1,000. For tax purposes, the MACRS class life is 5 years.

Instructions

(a) Assuming that the company uses the straight-line method for book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014?

(b) Assuming that the company uses the double-declining-balance method for both book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014?

(c) Why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both?