Talia’s Tutus bought a new sewing machine for $50,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line. Required: a. Find the depreciation charge each year. b. If the sewing machine is sold after 4 years for $20,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?
Talia’s Tutus bought a new sewing machine for $50,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line. Required: a. Find the depreciation charge each year. b. If the sewing machine is sold after 4 years for $20,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Talia’s Tutus bought a new sewing machine for $50,000 that will be
Required:
a. Find the depreciation charge each year.
b. If the sewing machine is sold after 4 years for $20,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?
Expert Solution
Step 1Introduction
Cost of machine= $50000
Useful life = 5 Years
Rate of depreciation = 20%
| Year | Adjusted Balance | Depreciation | Straight line depreciation | Declining balance with a switch to Straight line |
| 1 | 50000 | 20000 | 10000 | 20000 |
| 2 | 30000 | 12000 | 7500 | 12000 |
| 3 | 18000 | 7200 | 6000 | 7200 |
| 4 | 10800 | 4320 | 5400 | 5400 |
| 5 | 5400 | 5400 |
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