A large LIFO reserve indicates that the company has been deferring taxes, which could lead to significant tax payments if the method is changed. LIFO liquidation may also generate positive cash flow and result in higher taxable income and higher tax payments. US GAAP requires companies that use the LIFO method to disclose the amount of the LIFO reserve in…
Issuers with lower credit ratings (e.g., BB) must offer higher coupon rates to compensate investors for the increased risk of default. How to calculate coupon rate is also important for the issuers to manage the bond’s value. In conclusion, calculating the coupon rate of a bond is a crucial step in bond investing. By understanding the concept of a coupon…
Your depreciation deduction for the second year is $1,900 ($4,750 × 0.40). You reduce the adjusted basis ($288) by the depreciation claimed in the fourth year ($115) to get the reduced adjusted basis of $173. You multiply the reduced adjusted basis ($173) by the result (66.67%). Figure your depreciation deduction for the year you place the property in service by…