A machine was purchased 3 years ago at a cost of $4,000. It has a book...

 

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A machine was purchased 3 years ago at a cost of $4,000. It has a book value of $2,000 now. It can be sold now for $2,500 or it can be used for 3 years more. It has no salvage value. Corporate income taxes are 40% per year, which is also applied to capital gains. a) If the machine is sold now, what would be the amount of taxable gains and gains tax? b) If the machine is sold now for $5,000 instead of $2,500, what would be the amount of taxable gains and gains tax? c) If the machine was depreciated by the 175% declining balance method and then by a switch to straight-line depreciation, what would be its current book value? d) If the machine was depreciated by the 175% declining balance method, when would be the time to switch from declining balance method to straight-line method? A machine was purchased 3 years ago at a cost of $4,000. It has a book value of $2,000 now. It can be sold now for $2,500 or it can be used for 3 years more. It has no salvage value. Corporate income taxes are 40% per year, which is also applied to capital gains. a) If the machine is sold now, what would be the amount of taxable gains and gains tax? b) If the machine is sold now for $5,000 instead of $2,500, what would be the amount of taxable gains and gains tax? c) If the machine was depreciated by the 175% declining balance method and then by a switch to straight-line depreciation, what would be its current book value? d) If the machine was depreciated by the 175% declining balance method, when would be the time to switch from declining balance method to straight-line method?

Answer rating: 100% (QA)

a The taxable gain would be 500 2500 sale price 2000 book value The gains tax would be 200 ... View the full answer