Question

XYZ Inc. plans to sell an asset for $21,000. The asset was acquired 5 years ago for $50,000 and was depreciated using the straight-line method with an expected life of 5 years. If XYZ’s tax rate is 21%, then the taxes owed on the sale will be:
:

What is our firm’s initial investment, using the above data.

$1,000

$2,500

$3,400

$6,400

None of the above

Suppose you own 200 shares and four directors are to be elected. Since the firm uses cumulative voting, you can cast as many as ___________ votes for a single director.

A) 200 B) 400 C) 800 D) 8,000 E) None of the above

Answer 1

Answer 1: We assume that no residual value was estimated at the time of purchase for calculating depreciation for each year. Hence, the asset was completely depreciated till the end of year 5 and the book value of the asset at the end of year 5 will be 0 $ (Nil).

Therefore, entire sale value of 21,000 $ will be considered as capital gain and will result in a capital gain tax of

21,000 $ * 21% = 4,410 $

Answer 2: Cumulative voting is the procedure followed when electing a company's directors. In such a case each shareholder is entitled to one vote per share multiplied by the number of directors to be elected. The shareholder can split the votes between multiple candidates or one, as they desire.

Hence, in this case, the shareholder can cast as many as 200 * 4 = 800 votes for a single director.