Three years ago, Girston Gravel Pit purchased a material conveyor system. The company has decided to sell the system and acquire more advanced technology. Data relating to the existing system follow.
Current market value ............... $37,000
Original cost ................. 95,000
Current book value for tax purposes ........ 18,000
Current book value for financial accounting purposes . 35,000
Corporate tax rate ................ 30%
a. How much depreciation has been taken on the conveyor system for?
(1) Tax
(2) Financial accounting purposes?
b. What will be the after-tax cash flow from the sale of this asset?
c. What will be the after-tax cash flow from the sale of the asset if its market value is $9,000 rather than $37,000?