Author Question: Bill Sharpe, owner of Sharper Knives Inc., is closing his business at the end of the current fiscal ... (Read 119 times)

aabwk4 · **on:** Apr 25, 2021

Bill Sharpe, owner of Sharper Knives Inc., is closing his business at the end of the current fiscal year. His sole asset, the knife-sharpening machine, is four years old. A depreciation table for the asset is shown below. Bill has agreed to sell the machine at the end of the year for $100,000. What is the impact on taxes from the sale of the machine? (Assume that Sharper Knives claimed a regular depreciation expense in the calculation of income taxes.) The tax rate is 35%. Round your answers to the nearest dollar.

Depreciation Table for Knife Sharpener

Year	Basis	Rate	Depreciation Expense	Accumulated Depreciation
1	$250,000	14.29%	$35,725	$35,725
2	$250,000	24.49%	$61,225	$96,950
3	$250,000	17.49%	$43,725	$140,675
4	$250,000	12.49%	$31,225	$171,900
5	$250,000	8.93%	$22,325	$194,225

◦ $7,665 additional taxes owing to IRS
◦ $7,665 tax refund from IRS
◦ $25,165 additional taxes owing to IRS
◦ $25,165 tax refund from IRS
◦ $27,335 additional taxes owing to IRS

dantucker · **Reply #1 on:** Apr 25, 2021

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