a.
Book Value | $ 46,080 |
Book value = $ 96,000 x [ 1 - ( 0.20 + 0.32 ) ] = $ 46,080
b.
Tax Loss | $ 0 |
There is no tax loss as there is no gain on sale of the old equipment. Sale proceeds are lower than the book value.
c.
Tax benefit | $ 912 |
Loss on sale of old equipment = $ 43,800 - $ 46,080 = $ 2,280
Tax benefit of the loss = $ 2,280 x 40 % = $ 912.
d.
Cash Inflow | $ 44,712 |
e.
Net Cost | $ 275,288 |
f.
Depreciation Schedule for the New Equipment | |||
Year | Depreciation Base | Percentage Depreciation | Annual Depreciation |
1 | $ 275,288 | 20 % | $ 55,058 |
2 | 275,288 | 32 % | 88,092 |
3 | 275,288 | 19.2 % | 52,855 |
4 | 275,288 | 11.5 % | 31,658 |
5 | 275,288 | 11.5 % | 31,658 |
6 | 275,288 | 5.8 % | 15,967 |
g.
Depreciation Schedule for Old Equipment | |||
Year | Depreciation Base | Percentage Depreciation | Annual Depreciation |
1 | $ 96,000 | 19.20 % | $ 18,432 |
2 | 96,000 | 11.50 % | 11,040 |
3 | 96,000 | 11.50 % | 11,040 |
4 | 96,000 | 5.80 % | 5,568 |
information is in order last two screen shots are appendix. Hercules Exercise Equipment Co. purchased a...
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