Use the table below to answer this question. Ronnie\'s Custom Cars purchased som
ID: 2723217 • Letter: U
Question
Use the table below to answer this question.
Ronnie's Custom Cars purchased some fixed assets two years ago for $50,000. The assets are classified as 5-year property for MACRS. Ronnie is considering selling these assets now so he can buy some newer fixed assets which utilize the latest in technology. Ronnie has been offered $27,000 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?
MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76%Explanation / Answer
Statement showing computations Particulars Amount Cost of Fixed Assets 50,000.00 Depreciation for First Year = 50,000*20% 10,000.00 Depreciation for Second Year = 50,000*32% 16,000.00 Book Value after 2 Years 24,000.00 Sale Value 27,000.00 Gain oN Sales = 27,000 - 24,000 3,000.00 Tax @34% = 3000 *.34 1,020.00 Cash Flow from the savage Value = 27,000 - 1,020 25,980.00
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