Homework Help is Here – Start Your Trial Now!
Business
Accounting
Accounts receivable Inventory Furniture and equipment: Cost Tax Basis $ 53,200 148,800 66,500

Accounts receivable Inventory Furniture and equipment: Cost Tax Basis $ 53,200 148,800 66,500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

sanju

Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 53,200 148,800 Net cash flow 66,500 (53,200) 30,500 (6,100) Required: The purchaser paid a lump-sum price of $364,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $156,000, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
Transcribed Image Text:Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 53,200 148,800 Net cash flow 66,500 (53,200) 30,500 (6,100) Required: The purchaser paid a lump-sum price of $364,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $156,000, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS