Genetic Insights Co. purchases an asset for $11,595. This asset qualifies as a s

Question

Genetic Insights Co. purchases an asset for $11,595. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $4,065. Calculate gain or loss on disposal. Gain should be entered as a positive number. Loss should be entered as a negative number. Round the answer to two decimals.

Explanation / Answer

Calculation of book value of asset after the end of six years

Therefore book value of asset at the end of 6 years = $11595 - $10043.60 = $1551.40

Sale value of asset = $4065

THerefore gain on disposal of asset = $4065 - $1551.40 = $2513.60

Year Depreciation 1 =11595*14.29% = 1656.93 2 11595*24.49% = 2839.62 3 2027.97 4 1448.22 5 1035.43 6 1035.43 Total 10043.60

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