the previous example: Todd Company sells a parcel of land in exchange for $100,000, which the company will receive in four equal installments of $25,000 starting in the current year. Todd purchased the land 10 years ago for $40,000 and has a 35 percent tax rate. As noted, realized gain = $100,000 − $40,000 = $60,000 Assuming Todd Company elects to apply the installment sales method for tax purposes, how much of this $60,000 gain will Todd Company recognize in each of yea

the previous example: Todd Company sells a parcel of land in exchange for $100,000, which the company will receive in four equal installments of $25,000 starting in the current year. Todd purchased the land 10 years ago for $40,000 and has a 35 percent tax rate. As noted, realized gain = $100,000 − $40,000 = $60,000 Assuming Todd Company elects to apply the installment sales method for tax purposes, how much of this $60,000 gain will Todd Company recognize in each of yea

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 15DQ

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A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.) Year MACRS % Depreciation Deduction Tax Savings PV Factor Present Values 1 33.33% 3,333.00 1,333.20 0.893 1,190.55 2 44.45% 4,445.00 1,778.00 0.797 1,417.07 3 14.81% 1,481.00 592.40 0.712 421.79 4 7.41% 741.00 296.40 0.636 188.51 100% 10,000.00 4,000.00 3,217.91 2. Given an after-tax discount rate of 12%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000?
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