Use the table below to answer this question. Ronnie\'s Custom Cars purchased som
ID: 2740281 • Letter: U
Question
Use the table below to answer this question.
Ronnie's Custom Cars purchased some fixed assets two years ago for $60,000. 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 $32,000 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?
$26,995.20
$24,645.12
$28,800.00
$32,000.00
$30,912.00
Use the table below to answer this question.
Explanation / Answer
Cost of Fixed assets = $ 60,000
Less: Depreciation for 1 year (60,000 * 0.20) = $ 12,000
Less: Depreciation for 2 year (60,000 * 0.32) = $ 19,200
Book value after 2 Year = $ 28,800
Sale Value = $ 32,000
Book Value = $ 28,800
Gain of Sale (32,000 – 28,800) = $ 3,200
Tax on Gain on Sale = 3,200 * 0.34 = $ 1,088
Net Cash Flow = 32,000 – 1,088 = $ 30,912
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.