An asset was purchased three ago for $140,000. It falls into the five-year categ

Question

An asset was purchased three ago for $140,000. It falls into the five-year category for MACRS depreciation. The firm is in a 40 percent tax bracket. Use Table 12-12. a. Compute the tax loss on the sale and the related tax benefit if the asset is sold now for $17,060 (Input all amounts as positive values. Do not round intermediate calculations and round your answers to whole dollars.) b. Compute the gain and related tax on the sale if the asset is sold now for $60, 060. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to whole dollars.)

Explanation / Answer

cost of machine 140000 Year MACRS rate value of assets depreciation 1 0.2 140000 28000 2 0.32 140000 44800 3 0.192 140000 26880 4 0.192 140000 0 5 0.115 6 0.058 purchase cost 140000 total depreciation accumulated 99680 balance in asset class 40320 selling price 17060 Loss on the sale of asset -23260 Tax benfit 9304 cost of machine 140000 Year MACRS rate value of assets depreciation 1 0.2 140000 28000 2 0.32 140000 44800 3 0.192 140000 26880 4 0.192 140000 0 5 0.115 6 0.058 purchase cost 140000 total depreciation accumulated 99680 balance left in asset account 40320 selling price 60000 Profit on sale of assets 19680 tax obligation 7872

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