Edward's Manufactured Homes purchased some machinery 2 years ago for $319,000

Crafter's Supply purchased some fixed assets 2 years ago at a cost of $38,700. It no longer needs these assets so it is going to sell them today for $25,000. The assets are classified as 5-year property for MACRS. What is the net cash flow from this sale if the firm's tax rate is 30 percent?        A.  $13,122.20 B.  $18,576.00 C.  $20,843.68 D.  $23,072.80 E.  $25,211.09 Book value2 = $38,700 × (1 - 0.20 - 0.32) = $18,576 Aftertax salvage = $25,000 + [($18,576 - $25,000) × 0.30] = $23,072.80

67.

You own some equipment that you purchased 4 years ago at a cost of $225,000. The equipment is 5-year property for MACRS. You are considering selling the equipment today for $87,000. Which one of the following statements is correct if your tax rate is 35 percent?        A.  The tax due on the sale is $26,425. B.  The book value today is $186,120. C.  The accumulated depreciation to date is $38,880. D.  The taxable amount on the sale is $38,880. E.  The aftertax salvage value is $70,158. Accumulated depreciation4 = $225,000 × (0.20 + 0.32 + 0.192 + 0.1152) = $186,120 Book Value4 = $225,000 - $186,120 = $38,880 Taxable gain on sale = $87,000 - $38,880 = $48,120 Tax due = $48,120 × 0.35 = $16,842 Aftertax salvage value = $87,000 - $16,842 = $70,158

68.

Edward's Manufactured Homes purchased some machinery 2 years ago for $319,000. These assets are classified as 5-year property for MACRS. The company is replacing this machinery today with newer machines that utilize the latest in technology. The old machines are being sold for $140,000 to a foreign firm for use in its production facility in South America. What is the aftertax salvage value from this sale if the tax rate is 35 percent?        A.  $135,408 B.  $140,000 C.  $142,312 D.  $144,592 E.  $146,820 Book value2 = $319,000 × (1 - 0.20 - 0.32) = $153,120 Tax on sale = ($140,000 - $153,120) × 0.35 = -$4,592 (tax savings) After-tax cash flow = $140,000 + $4,592 = $144,592