Please show all parts. 4. ( 14 pts) [NOTE: Cash flow diagram is not necessary fo

Question

Please show all parts.

4. ( 14 pts) [NOTE: Cash flow diagram is not necessary for this problem] Omega Piezo in State College has a piece of packaging equipment that originally cost $34,500, with shipping and site preparation cost $400 and installation cost $200. At the end of the 4th year of service, the equipment was traded in for a different piece of packaging equipment with a purchase price of $39,900, shipping and site preparation cost $600 and installation cost $250. The trade-in allowance was $15,000 for purchasing the new machine. This equipment is a 7- year MACRS class. What is the cost basis of the new lathe for computing the amount of depreciation for income tax purposes?

Explanation / Answer

Cost basis Purchase Pice 39900 Shipping cost 600 Installation cost 250 Less: Trade in Allowance -15000 Cost basis 25750 Cost basis of net lathe is $25750

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