For each of the following cases, determine the total taxes resulting from the transaction. Assume a 40%
Question:
For each of the following cases, determine the total taxes resulting from the transaction. Assume a 40% tax rate. The asset was purchased 2 years ago for $200,000 and is being depreciated under MACRS using a 5-year recovery period.
a. The asset is sold for $220,000.
b. The asset is sold for $150,000.
c. The asset is sold for $96,000.
d. The asset is sold for$80,000.
Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes TABLE 4.2 Percentage by recovery yea ycars 20% 32 19 12 12 10 ycars 10% 18 14 12 Recovcry ycar 3 ycars 33% 45 15 14% 25 18 12 4 10 100% 100% 100% 100% Totals "These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance depreciation using the half-year convention
Step by Step Answer:
Current book value 200000 052 200000 96000 a b c ...View the full answer
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
Students also viewed these Finance questions
-
For each of the following cases for an RLC circuit, does the resonance frequency increase, decrease, or stay the same? If it changes tell by what factor. (a) Only the capacitance is changedit is...
-
For each of the following cases [(a) (b)], (I) State whether the study should be observational or experimental. (II) State whether the study should be run blind, double-blind, or neither. If the...
-
For each of the following cases, indicate(a) To what interest rate columns and(b) To what number of periods you would refer in looking up the future value factor.(1) In Table 1 (future value of 1):...
-
Calculate UTX's market value-added (MVA) for each year 2010-2012.
-
On January 1, 2015, Columbia Ltd. purchased $200,000 of 10%, 10-year bonds at face value (100) with the intention of selling the bonds early next year. Interest is received semi-annually on July 1...
-
Do you believe that budgets lead organizations to place too much emphasis on financial performance and not enough emphasis on the qualitative and nonfinancial aspects of performance? Why or why not?
-
The operating processes of a spark-ignition engine can be represented by the Otto cycle, which is internally reversible and gives a thermal efficiency of \[\eta_{\text {Otto...
-
Jesper Parnevik borrowed $70,000 on March 1, 2006. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2016. To retire this debt, Jesper plans to contribute to a...
-
An insurance agent has claimed that the average age of policy holders who insure through him is less than the average for all the agents, which is 35 years. A random sample of 40 policy holders who...
-
W&S Partners began the planning phase of the Cloud 9 audit. As part of the risk assessment phase for the new audit, the audit team needs to gain an understanding of Cloud 9's structure and its...
-
Troy Industries purchased a new machine 3 years ago for $80,000. It is being depreciated under MACRS with a 5-year recovery period using the percentages given in Table 4.2. Assume a 40% tax rate. a....
-
Samuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of $920,000 and total current liabilities of $640,000. As...
-
More Equations Than Variables Consider the system Find the RREF of the augmented matrix. Determine whether or not the system is consistent. If it is, find the solution or solutions, and give the...
-
Digital Bank of Singapore (DBS) is a universal bank that provides wealth management, equity research, and brokerage services to individuals and investment banking services to corporations. Maureen...
-
A company is expected to pay a $3.86 per-share dividend at the end of the year (D1 = $3.86). The stock sells for $50 per share and shareholders' required rate of return is 9%. The dividend is...
-
If the appropriate discount rate for the following cash flows is 15 percent per year, the present value of the cash flows is $ (Do not include the dollar sign ($). Round A your answer to 2 decimal...
-
The balance sheet for Stud Clothiers is shown. Sales for the year were $3,990,000, with 75 percent of sales sold on credit. compute Current ratio , quick ratio, debt to total assets ratio, asset...
-
Using this table, what would be the average tax rate for a single person making $50,000 Taxable Income (dollars) Single Taxpayers Taxable Income (dollars) Married Taxpayers Filing Joint Returns...
-
Table 22.3 shows a sample of a packet filter firewall ruleset for an imaginary network of IP address that range from 192.168.1.0 to 192.168.1.254. Describe the effect of each rule. Table 22.3 Sample...
-
Linda Lopez opened a beauty studio, Lindas Salon, on January 2, 2011. The salon also sells beauty supplies. In January 2012, Lopez realized she had never filed any tax reports for her business and...
-
What three iron minerals make up the bulk of iron ore?
-
Joe Martinez, a U.S. citizen living in Brownsville, Texas, invested in the common stock of Telmex, a Mexican corporation. He purchase 1,000 shares at 20.50 pesos per share. Twelve months later, he...
-
You have been given the expected return data shown in the first table on three assetsF, G, and Hover the period 20162019. Using these assets, you have isolated the three investment alternatives shown...
-
Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%....
-
1. Consider a customer at any place of employment or most recent place of employment 2. List the elements that would be required for your place of employment to deliver a single customer view. Based...
-
What ethical considerations and accountability mechanisms should leaders integrate into their vision communication strategies to ensure transparency, inclusivity, and alignment with organizational...
-
Give three reasons why an organization may support projects that do not have high-profit margins, also explain. Discuss how project selection might be different in an agile versus a plan-driven or...
Study smarter with the SolutionInn App