lates as a year property. The Market value of the asset the end of year 6 is $40,000. the company's incremental income-tax rate is 35%. The company's cash flows for the asset are as shown. 1 2 3 4 5 6 Year Initial Cost Revenue 0&M Expenses Salvage 0 $200K $60K $65K $65K $15K $15K $20K $70K $20K -) The first-year after tax-cash flow is ) The fourth-year taxable income is equal to ) The tax on depreciation recapture in year 6 is equal to $70K $25K $65K $25K $40K

lates as a year property. The Market value of the asset the end of year 6 is $40,000. the company's incremental income-tax rate is 35%. The company's cash flows for the asset are as shown. 1 2 3 4 5 6 Year Initial Cost Revenue 0&M Expenses Salvage 0 $200K $60K $65K $65K $15K $15K $20K $70K $20K -) The first-year after tax-cash flow is ) The fourth-year taxable income is equal to ) The tax on depreciation recapture in year 6 is equal to $70K $25K $65K $25K $40K

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...

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Question

A company purchases an asset at a cost $200,000 and depreciates as a MACRS 5-
year property. The Market value of the asset the end of year 6 is $40,000. the company's
incremental income-tax rate is 35%. The company's cash flows for the asset are as shown.
1
2
3
4
5
6
Year
Initial Cost
Revenue
O&M
Expenses
Salvage
0
$200K
$60K
$65K
$15K $15K
$65K
$20K
$70K
$20K
a) The first-year after tax-cash flow is
b) The fourth -year taxable income is equal to
c) The tax on depreciation recapture in year 6 is equal to
$70K
$25K
$65K
$25K
$40K

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