« previous next »

Author Question: A machine was purchased two years ago for 120,000 and can be sold for 50,000 today. The machine has ... (Read 554 times)

jeatrice

  • Hero Member
  • *****
  • Posts: 543
on: Jul 11, 2018
A machine was purchased two years ago for 120,000 and can be sold for 50,000 today. The machine has been depreciated using the MACRS 5-year recovery period and the firm pays 40 percent taxes on both ordinary income and capital gains.
 
  (a) Compute recaptured depreciation and capital gain (loss), if any.
  (b) Find the firm's tax liability.

Question 2

A firm has an issue of 1,000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date.
 
  If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for ________ today.
  A) 1,000
  B) 805.20
  C) 1,115.50
  D) 1,268.40


yasmin

  • Sr. Member
  • ****
  • Posts: 319
Reply #1 on: Jul 11, 2018
Answer to Question 1

(a) Book Value = 120,000 (1 - 0.20 - 0.32 ) = 57,600
Recaptured depreciation = 0
Capital loss = 57,600 - 50,000 = 7,600
(b) Tax benefit = 7,600  0.40 = 3,040

Answer to Question 2

D


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

The longest a person has survived after a heart transplant is 24 years.

Did you know?

Addicts to opiates often avoid treatment because they are afraid of withdrawal. Though unpleasant, with proper management, withdrawal is rarely fatal and passes relatively quickly.

Did you know?

Stevens-Johnson syndrome and Toxic Epidermal Necrolysis syndrome are life-threatening reactions that can result in death. Complications include permanent blindness, dry-eye syndrome, lung damage, photophobia, asthma, chronic obstructive pulmonary disease, permanent loss of nail beds, scarring of mucous membranes, arthritis, and chronic fatigue syndrome. Many patients' pores scar shut, causing them to retain heat.

Did you know?

Urine turns bright yellow if larger than normal amounts of certain substances are consumed; one of these substances is asparagus.

Did you know?

Looking at the sun may not only cause headache and distort your vision temporarily, but it can also cause permanent eye damage. Any exposure to sunlight adds to the cumulative effects of ultraviolet (UV) radiation on your eyes. UV exposure has been linked to eye disorders such as macular degeneration, solar retinitis, and corneal dystrophies.

Defying thousands of years of conventional wisdom, scientists are reporting that it is possible for Defying thousands of years of conventional wisdom, scientists are reporting that it is possible for
On March 25, 1911, as scores of young factory girls leaped to their deaths from the eighth, ninth, a On March 25, 1911, as scores of young factory girls leaped to their deaths from the eighth, ninth, a
Checklist of Developmental Skills: Birth to 5 years Cont. Checklist of Developmental Skills: Birth to 5 years Cont.
Life Cycle Nutrition: Toddlers through the Later Years Life Cycle Nutrition: Toddlers through the Later Years
People are living longer today than in previous decades People are living longer today than in previous decades
An inventory record sheet shows a balance on hand of 972. During the month units sold were 111, ... An inventory record sheet shows a balance on hand of 972. During the month units sold were 111, ...
Video: Muscular System Animation

For a complete list of videos, visit our video library