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Genetic Insights Co. purchases an asset for $10,522. This asset qualifies as a seven-year recovery asset...
Genetic Insights Co. purchases an asset for $10,522. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $3,906
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Expert Solution
|
Year |
MACRS % |
Depreciation |
Accumulated Depreciation |
Book Value |
|
1 |
0.1429 |
1503.5938 |
1503.59 |
9018.4062 |
|
2 |
0.2449 |
2576.8378 |
4080.43 |
6441.5684 |
|
3 |
0.1749 |
1840.2978 |
5920.73 |
4601.2706 |
|
4 |
0.1249 |
1314.1978 |
7234.93 |
3287.0728 |
|
5 |
0.0893 |
939.6146 |
8174.54 |
2347.4582 |
|
6 |
0.0892 |
938.5624 |
9113.1 |
1408.8958 |
At the end of 6th year book value of asset is 1408.9
The asset is sold for 3906
Because sale price is more than the book value of asset the gain on sale of asset will be taxed
Gain = 3906 – 1409
= 2497
Tax rate = 30%
Tax on sale of asset = 2497* 30%
= 749.1
Net cash flow from sale of asset = 3906 - 749.1 = 3156.9 or 3157
--------------------------------------------------------------------------------------------------------------------------
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jeff jeffy answered 2 months agoRelated Solutions
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