Question

In: Accounting

3. A personal property asset has a purchase price of $50,000 and an installation cost of...

3. A personal property asset has a purchase price of $50,000 and an installation cost of $10,000. Book depreciation method is the sum-of-years-digits method with a 6-year depreciable life and a $3,000 salvage value. Which one of the following values is correct (rounded to the nearest integer)?

(a) D3 = $11,429 (b) B4 = $8,571 (c) B5 = $5,429 (d) D6 = $2,714

4. On January 1st 2009, a company purchased a machine for $14,000, which is a 7-year MACRS property. The company also paid $6,000 for the transportation and installation of the machine. The machine was sold for $7,000 on December 31st 2013. If gains tax rate was 34%, how much gains taxes did the company owe?

(a) $73 (b) $1,318 (c) $559 (d) $863

Above are two multiple choice questions and answers (a) through (d). please tell me which answer is correct

Expert Solution

Required 1

Year	Depreciation base	Remaining Life	Depreciation Fraction	Depreciation Amount	Book Value
1	$ 57,000	6	6/21	$ 16,286	$ 40,714
2	$ 57,000	5	5/21	$ 13,571	$ 27,143
3	$ 57,000	4	4/21	$ 10,857	$ 16,286
4	$ 57,000	3	3/21	$ 8,143	$ 8,143
5	$ 57,000	2	2/21	$ 5,429	$ 2,714
6	$ 57,000	1	1/21	$ 2,714	$ -

Correct answer (d) D6 = $2,714

Required 2

Year	Depreciation base	Depreciation Rate	Depreciation Amount	Book Value
2009	$ 20,000	14.29%	$ 2,858.00	$ 17,142.00
2010	$ 20,000	24.49%	$ 4,898.00	$ 12,244.00
2011	$ 20,000	17.49%	$ 3,498.00	$ 8,746.00
2012	$ 20,000	12.49%	$ 2,498.00	$ 6,248.00
2013	$ 20,000	4.465%	$ 893.00	$ 5,355.00

Book Value as on December 31st 2013 = $5,355

Sales Value = $7,000

Profit on sale = $1,645

Tax rate = 34%

Tax owed = $1,645 * 34% = $559

Correct answer (c) $559

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ekkarill92 answered 1 year ago

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