DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $135,000. The firm has a chance to sell its 5-year-old roaster for $34,000. The existing roaster originally cost $60,500and was being depreciated using MACRS and a 7-year recovery period (see the table attached below.)DuPree is subject to a 21% tax rate.a. What is the book value of the existing roaster?b. Calculate the after-tax proceeds of the sale of the existing roaster.c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current LiabilitiesAccruals−$19,500Inventory+50,000Accounts payable+40,900Accounts receivable+70,200Cash0Notes payable+14,400 ### Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property ClassesThis table provides rounded depreciation percentages based on the Modified Accelerated Cost Recovery System (MACRS) for the first four property classes over different recovery periods: 3, 5, 7, and 10 years.#### Table Overview| Recovery Year | 3 Years | 5 Years | 7 Years | 10 Years ||---------------|---------|---------|---------|----------|| 1 | 33% | 20% | 14% | 10% || 2 | 45% | 32% | 25% | 18% || 3 | 15% | 19% | 18% | 14% || 4 | 7% | 12% | 12% | 12% || 5 | | 12% | 9% | 9% || 6 | | 5% | 9% | 8% || 7 | | | 9% | 7% || 8 | | | 9% | 6% || 9 | | | | 6% || 10 | | | | 6% || 11 | | | | 4% || **Totals** | **100%**| **100%**| **100%**| **100%** |#### Notes:- The percentages are rounded to the nearest whole percent to simplify calculations while maintaining realism.- For precise tax depreciation, apply the actual unrounded percentages or use the double-declining balance (200%) depreciation method with the half-year convention.

Calculation of depreciation as per MACRS table Year Depreciation 1 14% 2 25% 3 18% 4…

Answered: DuPree Coffee Roasters, Inc., wishes…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $135,000. The firm has a chance to sell its 5-year-old roaster for $34,000. The existing roaster originally cost $60,500
and was being depreciated using MACRS and a 7-year recovery period (see the table attached below.)

DuPree is subject to a 21% tax rate.

a. What is the book value of the existing roaster?

b. Calculate the after-tax proceeds of the sale of the existing roaster.

c. Calculate the change in net working capital using the following figures:

Anticipated Changes in Current Assets and Current Liabilities
Accruals	−$19,500
Inventory	+50,000
Accounts payable	+40,900
Accounts receivable	+70,200
Cash	0
Notes payable	+14,400

### Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes

This table provides rounded depreciation percentages based on the Modified Accelerated Cost Recovery System (MACRS) for the first four property classes over different recovery periods: 3, 5, 7, and 10 years.

#### Table Overview

| Recovery Year | 3 Years | 5 Years | 7 Years | 10 Years |
|---------------|---------|---------|---------|----------|
| 1 | 33% | 20% | 14% | 10% |
| 2 | 45% | 32% | 25% | 18% |
| 3 | 15% | 19% | 18% | 14% |
| 4 | 7% | 12% | 12% | 12% |
| 5 | | 12% | 9% | 9% |
| 6 | | 5% | 9% | 8% |
| 7 | | | 9% | 7% |
| 8 | | | 9% | 6% |
| 9 | | | | 6% |
| 10 | | | | 6% |
| 11 | | | | 4% |
| **Totals** | **100%**| **100%**| **100%**| **100%** |

#### Notes:
- The percentages are rounded to the nearest whole percent to simplify calculations while maintaining realism.
- For precise tax depreciation, apply the actual unrounded percentages or use the double-declining balance (200%) depreciation method with the half-year convention.

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