Share
Explore BrainMass

Determination of Capital Gain and Cash Flow

1. The Johnson Company bought a truck costing $24,000 two and a half years ago. The truck's estimated life was four years at the time of purchase. It was accounted for by using straight line depreciation with zero salvage value. The truck was sold yesterday for $19,000. What taxable gain must be reported on the sale of the truck?

2. If the Johnson Company of Problem 1 is subject to a marginal tax rate of 34%, what is the cash flow associated with the sale of the used truck?

5. McFadden Corp. reports the following balances on their December 31, 20X2 Balance Sheet:
($000)
Accounts Payable 60
Accounts Receivable 120
Accumulated Depreciation 350
Inventory 150
Fixed Assets (Net) 900
Long Term Debt 400
Paid in Excess 160
Retained Earnings 380
Total Assets 1,240
Total Liabilities 500 (long term debt + current liabilities)

All of the remaining accounts are listed below. Calculate the balance in each.

Accruals
Cash
Common Stock
Fixed Assets (Gross)

Total Current Assets
Total Current Liabilities
Total Equity

Attachments

Solution Preview

For your review, I have attached a formatted MS Excel ...

Solution Summary

1. The Johnson Company bought a truck costing $24,000 two and a half years ago. The truck's estimated life was four years at the time of purchase. It was accounted for by using straight line depreciation with zero salvage value. The truck was sold yesterday for $19,000. What taxable gain must be reported on the sale of the truck?

2. If the Johnson Company of Problem 1 is subject to a marginal tax rate of 34%, what is the cash flow associated with the sale of the used truck?

5. McFadden Corp. reports the following balances on their December 31, 20X2 Balance Sheet:
($000)
Accounts Payable 60
Accounts Receivable 120
Accumulated Depreciation 350
Inventory 150
Fixed Assets (Net) 900
Long Term Debt 400
Paid in Excess 160
Retained Earnings 380
Total Assets 1,240
Total Liabilities 500 (long term debt + current liabilities)

All of the remaining accounts are listed below. Calculate the balance in each.

Accruals
Cash
Common Stock
Fixed Assets (Gross)

Total Current Assets
Total Current Liabilities
Total Equity

$2.19