Four years ago, Sierra Instruments of Monterey, California, spent $200,000 for equipment for manufacturing standard gas flow calibrators. The equipment was depreciated by MACRS using a 3-year recovery period. For year 4, GI was $100,000, OE was $50,000, and Te was 40%. Develop hand and spreadsheet solutions for year 4 only that determine the CFAT if the asset was disposed of as follows (Neglect any tax effects caused by the sale.): (a) Discarded with no salvage value at the end of year 4. (b) Sold for $20,000 at the end of year 4. (c) Sold for $20,000 at the end of year 4; however, SL depreciation was applied throughout the 3-year recovery period.
Four years ago, Sierra Instruments of Monterey, California, spent $200,000 for equipment for manufacturing standard gas flow calibrators. The equipment was depreciated by MACRS using a 3-year recovery period. For year 4, GI was $100,000, OE was $50,000, and Te was 40%. Develop hand and spreadsheet solutions for year 4 only that determine the CFAT if the asset was disposed of as follows (Neglect any tax effects caused by the sale.): (a) Discarded with no salvage value at the end of year 4. (b) Sold for $20,000 at the end of year 4. (c) Sold for $20,000 at the end of year 4; however, SL depreciation was applied throughout the 3-year recovery period.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Four years ago, Sierra Instruments of Monterey,
California, spent $200,000 for equipment for
manufacturing standard gas flow calibrators. The
equipment was
3-year recovery period. For year 4, GI was
$100,000, OE was $50,000, and Te was 40%.
Develop hand and spreadsheet solutions for year 4
only that determine the CFAT if the asset was
disposed of as follows (Neglect any tax effects
caused by the sale.):
(a) Discarded with no salvage value at the end of
year 4.
(b) Sold for $20,000 at the end of year 4.
(c) Sold for $20,000 at the end of year 4; however,
SL depreciation was applied throughout
the 3-year recovery period.
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