Talia’s Tutus bought a new sewing machine for $85,000 that will be depreciated over 5 years...
Talia’s Tutus bought a new sewing machine for $85,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line.
Required:
a. Find the depreciation charge each year.
b. If the sewing machine is sold after 3 years for $35,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?
Part A:
| YEar | Depreciation |
| 1 | |
| 2 | |
| 3 | |
| 4 | |
| 5 |
Part B:
After-Tax Proceeds: ______________________
Homework Answers
a)
Double declining rate=2*1/usefule life of asset
=2*1/5
=40%
b)
Sale value =35,000
(-)Book value at the end of 3rd year=18,360
Profit =16,640
Less:tax@35% =5,824
After tax proceeds =35,000-5,824
=$29,176
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