Question

Answer part B, part A is correct

estimated to be A company purchases an industrial laser for $153,000. The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of $50,000. The before-tax cash flow V per y Ogested applving the 3-vear MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 25% , determine the depreciation schedule and the after tax cash flow b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $85,000 in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year? Click the icon to view the GDS Recovery Rates (r) for the 3-year property class. a. Determine the MACRS depreciation amounts and the after tax cash flow for this laser. Fill in the table below. (Round to the nearest dollar.) EOY Depreciation, $ ATCF, S -153.000 0 - 50995 72749 68009 77002 65665 22659 Copy 11337 100334 4 b. The amount of gain on the disposal of the asset at the end year two is $51003. (Round to the nearest dollar.)

Answer 1

Since it has provided that part a of the question is correct, we will be using the same for our computations

Depreciated value of the asset at the end of year 2:

Acquisition cost = 153000

Less: Year1 depreciation = 50995

Year 2 depreciation = 68009

Book value = 33996

Selling price= 85000

Net gain= 51004