An electrical appliance company purchasedan industrial robot costing $300,000 inyear 0. The industrial robot to be used forwelding operations is depreciated at a 30%declining balance rate for tax purposes. Ifthe robot is to be sold after 5 years, com-pute the amounts of gains (losses) andthe disposal tax effect for the followingthree salvage values with a corporate taxrate of 34%.(a) $10,000(c) $200,000(b) $125,460

After-tax salvage value refers to the residual value of an asset or property after it has been sold…

Answered: An electrical appliance company…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 1BD

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Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
Effect of depreciation on net income Einstein Construction Co. specializes in building replicas of historic houses. Bree Andrus. president of Einstein Construction, is considering the purchase of various items of equipment on July 1. 20Y2. for $300,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Bee is considenng depreciating the equipment by the straight-line method. She discussed the matter with her CPA and learned that although the straight-line method could be elected, it was to her advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. She asked for your advice as to which method to use for tax purposes. What factors would you present for Bree’s consideration in the selection of a depreciation method?
Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year. Turnip uses differing depreciation methods for financial reporting and income tax purposes. The depreciation expense during the current year for financial reporting is 1,000 and for income tax purposes is 2,000. Turnip is subject to a 30% enacted future tax rate. Prepare a schedule to compute Turnips (a) ending future taxable amount, (b) ending deferred tax liability, and (c) change in deferred tax liability (deferred tax expense) for the current year.
An equipment was purchased by a Company at the cost of $875,000. It was depreciated for five years on a straight-line basis to zero-salvage value. The market value of this equipment is $85,000. Tax rate applicable to this Company is 40%. Calculate the After-tax Salvage value. a. $85,000 b. $121,000 c. $90,000 d. $51,000
. A manufacturing company purchased a new machine costing $500,000 now (year 0). The machine to be used for welding is depreciated at a 30% declining balance rate for tax purposes. If the machine is to be sold after seven years,compute the amounts of gains (losses) and the disposal tax effect for the following three salvage values with a corporate tax rate of 35%. a) $ 30,000 b) $175,000 c) $525,000
In year 0, an electrical appliance companypurchased an industrial robot costing $350,000. Therobot is to be used for welding operations, classified as seven-year recovery property, and has beendepreciated by the MACRS method. If the robot isto be sold after five years, compute the amounts ofgains (losses) for the following two salvage values(assume that both capital gains and ordinary incomesare taxed at 34%):(a) $20,000(b) $99,000
In year 0, an electrical appliance company purchased an industrial robot costing $350,000. The robot is to be used for welding operations, classified as seven- year recovery property, and has been depreciated by the MACRS method. If the robot is to be sold after five years, compute the amounts of gains (losses) for the following two salvage values (assume that both capital gains and ordinary incomes are taxed at 21%): (a) $20,000 (b) $99,000 pany had sales revenues of
In year 0, an electrical appliance company purchased an industrial robot costing $350,000. The robot is to be used for welding operations, classified as seven-year recovery property, and has been depreciated by the MACRS method. If the robot is to be sold after five years, compute the amounts of gains (losses) for the following two salvage values (assume that both capital gains and ordinary incomes are taxed at 34%): $20,000 $99,000
1. A special manufacturing and handling device was purchased by Alfonso Manufacturing for $200,000 and is depreciated over MACRS. CFBT is estimated to amount to $800,000 for the first 2 years followed by $600,000 thereafter until the asset is retained. The effective tax rate, Te is 35% and interest is 10% per year. In present worth dollars determine the CFAT and determine if it was a viable purchase. (Note answer must be in a tabular format)
Company FGH spent $10,000 to purchase equipment in year zero. The equipment is being depreciated to zero using straight line depreciation over a five-year tax life. At the end of the fourth year, the equipment is sold for $5,000. What is the after-tax salvage value of this equipment, assuming a tax rate of 40%?

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