Purchase Solution

Calculate the book value and taxes on sale of machine

Not what you're looking for?

Ask Custom Question

Troy Industries purchased a new machine 3 years ago for $80,000. It is being depreciated under MACRS with a 5-years recovery period using the percentage given in Table 3.2 on page 100. Assume 40% ordinary and capital gains tax rates.

a. What is the book value of the machine?

b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $100,000; $56,000; $23,200; and $15,000.

Purchase this Solution
Solution Summary

This solution illustrates how to calculate the book value and taxes on the sale of a machine.

Solution Preview

a. What is the book value of the machine?

Cost of machine $80,000
Depreciation:
First year $16,000 ($80,000*.200)
Second year 25,600 ...

Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Introduction to Finance

This quiz test introductory finance topics.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

View More Free Quizzes
Related BrainMass Solutions

  • WACC and Capital Gains Tax

    Sale price of the machine= $20,000 Book value of the machine= $20,000 Profit on the sale of machine= $0 =$20,000-$20,000 Tax @ 34% = $0 =34.% x $ Answer: Taxes associated with sales= $0

  • Capital Budgeting: The payback period, NPV and Profitability Index

    The depreciation is the incremental depreciation on new and old equipment ( this is incremental since we have paid tax on the differential of sale price and book value, the book value of old machine has to be depreciated and removed from the depreciation

  • Calculating Book Value of the Machine

    Calculate the book value of the machine as of June 30, 2006, calculate the gain or loss on the sale of the machine assuming Roberts sells it for $102,000, and calculate the gain or loss on the sale of the machine assuming Roberts sells it for $25,000.

  • Capital Budgeting for High Tech Production Inc

    What will be the book value of the new piece of equipment when it comes time to sell it, and what will be the tax gain or loss on the sale of the new equipment? i.

  • Cushing Corporation is considering the purchase of a new gra

    Solution: New asset cost = 35000 + 5000 = 40000 Current asset book value = 20000 - (20000 * 3/5) = 8000 Sale of current machine would produce: Recovered depreciation = 20000 - 8000 = 12000 Capital gain on sale of current machine = 25000

  • Vastine, Nova and Benson: Calculate book value, payback period, NPV, IRR

    The second machine requires an initial investment of $21,000 and provides an annual cash inflow after taxes of $4,000 for 20 years. a. Determine the payback period for each machine. b.

  • Machine Sale - Book value and journal entry

    There is a gain on 4,500-3,200=1,300 on sale The journal entry is Cash Dr 4,500 Accumulated Depreciation Dr 2,800 Machine Cr 6,000 Gain on Sale Cr 1,300 The solution explains how to calculate the book value of the machine at the time of sale and

  • IRR of a Proposed Project

    First find the cash inflow from the sale of the machine. For this calculate the book value and then find the difference between the book value and the sale price to get the taxable price.

  • Incremental after-tax cash flows

    t=0 through t=5 New Machine Cost 170,000 Old machine Book Value 48,000 Old Equipment Depreciation under 5 year MACRS Sale price of old machine 105,000 Year 1 2 3 4 5 6 Gain on Sale 57,000 Rate 0.200

View More Related Solutions