Homework Answers
1. Book value of the equipment at the time of sale = $ 4,608.
| Depreciation Year 1 | $ 1,000 |
| Depreciation Year 2 | 1,800 |
| Depreciation Year 3 | 1,440 |
| Depreciation Year 4 | 1,152 |
| Total depreciation taken in 4 years | $ 5,392 |
Book value = $ 10,000 - $ 5,392 = $ 4,608
2. Gain on sale of equipment = Sale Proceeds - Book Value = $ 7,000 - $ 4,608 = $ 2,392
Tax on gain @ 30 % = $ 2,392 * 30 % = $ 717.60 or $ 718
Net cash received on sale of equipment = $ 7,000 - $ 718 = $ 6,282
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