Genetic Insights Co. purchases an asset for $11,180. This asset qualifies as a s

Question

Genetic Insights Co. purchases an asset for $11,180. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $3,215. Calculate gain or loss on disposal. Gain should be entered as a positive number. Loss should be entered as a negative number. Round the answer to two decimals.

Explanation / Answer

Book value as on date of sales=$11180(1-0.1429-0.2449-0.1749-0.1249-0.0893-0.0893)

=$1495.884

Hence gain on disposal=($3215-$1495.884)

=$1719.12(Approx).

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