suppose the asset bought for $100,000 has been sold for $100000 after two years.
ID: 1101836 • Letter: S
Question
suppose the asset bought for $100,000 has been sold for $100000 after two years. which of the following statement is most accurate?
I- there is capital gain
II- there is capital loss
III- there is depreciation recapture
2- Suppose the asset has been sold for $110,000 after two years. Initial purchase price of $100,000, a gross income of $40,000, a current book value of $60,000, a depreciation amount of $10,000, and tax rate of 50%. What is the taxable income?
3- A truck was purchased 3 years ago for $45,000 and can be sold today for $24,000. The operating costs are $9,000 per year, and it is expected to last 4 more years with a $5,000 salvage value. A new truck, which will perform that same service, can be purchased for $50,000, and it will have a life of 10 years with operating costs of $28,000 per year and a $10,000 salvage value. What is the value that should be used as P for the presently owned vehicle in a replacement study?
4- an asset was acquired by Hugo and Sons for a first cost of $100000 via a 10% per year loan that needs to be paid back using equal uniform amounts at the end of each year in 2 years. The amount of interest paid for the first year on this loan is?
5- an asset was acquired by Hugo and Sons for a first cost of $100000 via a 10% per year loan that needs to be paid back using equal uniform amounts at the end of each year in 2 years. In the first year, the company claimed $60,000 depreciation. If the gross income is $200,000 and operating expenses are $50,000, then the taxable income is?
Explanation / Answer
The correct answer is:
III- there is depreciation recapture
Since capital gain or loss is not there since buying and selling price is same. However, the depreciation that was claimed has been recaptured since the nominal value did not change.
2)
Taxable income = Gross Income - Operating expenses - Depreciation + depreciation recapture = Gross Income - Operating expenses - Depreciation + (Salvage value - Book value) = 40,000 - 10,000 + 110,000 - 60,000 = $ 80,000 = Answer
3) P = ($ 50,000 - 24,000) = $ 26,000 = Answer (Note, the buying price of the present truck is sunk cost, hence, only current market price (salvage) is to be considered.
4) Amount of interest = Principal to be repayed in the beginning of the year * rate = $ 100,000 * 10% = $ 10,000 = ANswer
5) Taxable income = Gross income - operating expenses - depreciation - interest
= $ 200000 - $ 50000 - $ 60000 - $ 10000 = $ 80,000 = ANswer
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.