Melody Corporation purchased a machine for $400,000. This machine has a useful life of 10 years...

Melody Corporation purchased a machine for $400,000. This machine has a useful life of 10 years and an estimated salvage of $20,000. Depreciation was recorded on a straight-line basis for 7 years. After recording depreciation expense in the 7^th year, Melody sold the machine for $100,000.

(a) What is the carrying value of the machine at the point of sale? (10 pts)

(b) How much gain or loss should Melody report on the sale? (6 pts). Clearly identify if the amount is a gain or a loss. (4 pts)

Expert Solution

ekkarill92 answered 2 years ago

A manufacturing company has purchased a new machine for $400,000 with a lifetime of 10-years. The...

A manufacturing company has purchased a new machine for $400,000 with a lifetime of 10-years. The increased net income due to this machine is $90,000. The company’s tax rate is 40% and after-tax MARR is 12%. The company is planning to use the machine for 8 years and then sell it for $30,000. Develop tables using a spreadsheet to determine the after-tax cash flow for each year from 1 through 8. Calculate the after-tax PW and ERR after 8 years...

Your Company purchased a machine with an estimated useful life of 8 years. The machine will...

Your Company purchased a machine with an estimated useful life of 8 years. The machine will generate cash inflows of $96,000 each year. The salvage value at the end of the project is $80,000. Your Company's discount rate is 6%. The net present value of the investment is ($7,500). What is the purchase price of the machine?

A machine with an initial purchase price of $29100 has a useful life of 10 years....

A machine with an initial purchase price of $29100 has a useful life of 10 years. The usage of this machine is forecasted to bring us the savings in the table below. At an interest rate of 0% how many years will it take to payback the investment? Year 1 2 3 4 5 6 7 8 9 10 Savings, $ 7000 9000 5000 3000 4000 6000 5000 6000 4000 7000 1-2 years 2-3 years 3-4 years 4-5 years 5-6...

You have a combine that was purchased for $300,000, has a useful life of 10 years,...

You have a combine that was purchased for $300,000, has a useful life of 10 years, and has a salvage value of $50,000. What is the value of the combine after subtracting two years of depreciation using (1) the triple declining balance method and (2) straight line depreciation method?

A machine was purchased on January 1 for $100,000. The machine has an estimated useful life...

A machine was purchased on January 1 for $100,000. The machine has an estimated useful life of 4 years with a salvage value of $10,000. Under the straight-line method, accumulated depreciation at the end of year 2 is:

A firm has purchased for $14,000 a machine with a five year useful life. The machine...

A firm has purchased for $14,000 a machine with a five year useful life. The machine will be depreciated using ADS on a three-year depreciation schedule. The uniform annual benefits are $3600. The firm’s effective tax rate is 47% and the MARR before tax is 10%. The firm estimates that there is a 40% likelihood that the machine will have a salvage value of $5,000 and due to the probability of obsolescence, a 60% likelihood that the machine will have...

A firm paid $370,000 for a machine with a useful life of 10 years, at which...

A firm paid $370,000 for a machine with a useful life of 10 years, at which point they expect to sell it for $100,000. Assuming they use time as their allocation basis and use double-declining balance depreciation, how much depreciation will they record in Year 1? How much is the depreciation?

On June 30, a machine with a useful life of 10 years and a residual value...

On June 30, a machine with a useful life of 10 years and a residual value of $10,000 was purchased for $75,000. What is the depreciation expense for year 2 under straight line depreciation? A. 6,500 B. 13,000 Not sure if the question is looking for just the expense for year 2 which would be $6,500, or the accumulated depreciation expense of all the years up until year 2 which would then be $13,000.

Salam Corporation purchased a vibratory finishing machine for $25,000 in year 0. The useful life of...

Salam Corporation purchased a vibratory finishing machine for $25,000 in year 0. The useful life of the machine is 10 years, at the end of which the machine is estimated to have a salvage value of 5,000 after 10 years. The machine generates net annual benefits of $5,000.The Conventional and Discounted Payback Period If SALAM’s MARR (rate of return) is 12%, will be following? Conventional Pay Back of 6 years & Discounted Pay Back of 9 years Conventional Pay Back...

On May 31, 2014, Franklin Company purchased a machine for $205,000. The machine has useful life...

On May 31, 2014, Franklin Company purchased a machine for $205,000. The machine has useful life 5 years or 100,000 units with $5,000 salvage value. Franklin uses 14,000 units in 2014 and 38,000 units in 2015. Compute depreciation expense for 2014 and 2015 and prepare the necessary JOURNAL ENTRIES at year end December 31 using the following methods: 1. Straight-line 2. Units of activity 3. Double-Declining Balance

Question