214 If Scott Construction Company purchases a new steamroller, it will sell its
ID: 2410640 • Letter: 2
Question
214 If Scott Construction Company purchases a new steamroller, it will sell its old steamroller. The cost of the old steamroller is $215,000 and the accumulated depreciation on the old steamroller is $150,700. Scott's tax rate is 30 percent. What is the book value of the steamroller? If the steamroller sold for $84,000 cash, what is the after-tax cash inflow from the sale of the steamroller? If the steamroller sold for $54,000 cash, what is the after-tax cash inflow from the sale of the steamroller?Explanation / Answer
Answers
Working
Situation 1
Situation 2
A
Sold for
$ 84,000.00
$ 54,000.00
B
Cost
$ 2,15,000.00
$ 2,15,000.00
C
Accumulated Depreciation
$ 1,50,700.00
$ 1,50,700.00
D= B - C
Book Value
$ 64,300.00
$ 64,300.00
E = A - D
Gain (Loss) on Sale
$ 19,700.00
$ (10,300.00)
F = [E] x 30%
(Tax on Gain) Tax Saved
$ (5,910.00)
$ 3,090.00
G = A + F
After Tax Cash Inflow
$ 78,090.00
$ 57,090.00
Working
Situation 1
Situation 2
A
Sold for
$ 84,000.00
$ 54,000.00
B
Cost
$ 2,15,000.00
$ 2,15,000.00
C
Accumulated Depreciation
$ 1,50,700.00
$ 1,50,700.00
D= B - C
Book Value
$ 64,300.00
$ 64,300.00
E = A - D
Gain (Loss) on Sale
$ 19,700.00
$ (10,300.00)
F = [E] x 30%
(Tax on Gain) Tax Saved
$ (5,910.00)
$ 3,090.00
G = A + F
After Tax Cash Inflow
$ 78,090.00
$ 57,090.00
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