TB MC Qu. 12-77 (Algo) Antique Corporation is contemplating the ... Antique Corporation is contemplating the replacement of an existing asset used in the operation of its business. The original cost of this asset was $34,000; since date of acquisition, the company has taken a total of $26,000 of depreciation expense on this asset. The current disposal (market) value of this asset is estimated as $22,000. Antique is subject to a combined income tax rate, t, of 39%. What is the projected after-tax cash flow associated with the sale of the existing asset?

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.