Use the table below to answer this question. Ronnie\'s Custom Cars purchased som

Question

Use the table below to answer this question.

  

   

Ronnie's Custom Cars purchased some fixed assets two years ago for $120,000. 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 $62,000 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?

$57,600.00

$62,000.00

$52,670.40

$60,504.00

$47,970.24

Use the table below to answer this question.

Explanation / Answer

$60,504.00

working:

a. Depreciation Schedule: Year Costs Depreciation rate Depreciation Expense Accumulated Depreciation Ending Book Value 1 $       1,20,000 20.00% $       24,000 $ 24,000 $ 96,000 2 $       1,20,000 32.00% $       38,400 $ 62,400 $ 57,600 b. Sales Proceeds a $ 62,000.00 Book Value b $ 57,600.00 Profit on sale c=a-b $   4,400.00 Tax on profit d=c*34% $   1,496.00 Net Cash flow e=a-d $ 60,504.00

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