Troy Industries purchased a new machine 2 year(s) ago for $78,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100% . Assume 21% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $93,600; $54,600; $37,440; and $26,200. Sale Capital Tax on Depreciation Tax on Total price Gain capital gain recevory recevory Tax $93,600 ? ? ? ? ? $54,600 ? ? ? ? ? $37,400 ? ? ? ? ? $26,200 ? ? ? ? ?
Troy Industries purchased a new machine 2 year(s) ago for $78,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100% . Assume 21% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $93,600; $54,600; $37,440; and $26,200. Sale Capital Tax on Depreciation Tax on Total price Gain capital gain recevory recevory Tax $93,600 ? ? ? ? ? $54,600 ? ? ? ? ? $37,400 ? ? ? ? ? $26,200 ? ? ? ? ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Troy Industries purchased a new machine 2 year(s) ago for $78,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule
.
Assume 21%
ordinary andcapital gains tax rates.
Recovery year 3 years 5 years 7 years 10 years
1 33% 20% 14% 10%
2 45% 32% 25% 18%
3 15% 19% 18% 14%
4 7% 12% 12% 12%
5 12% 9% 9%
6 5% 9% 8%
7 9% 7%
8 4% 6%
9 6%
10 6%
11 4%
Totals 100% 100% 100% 100%
ordinary and
a. What is the book value of the machine?
b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $93,600; $54,600; $37,440; and $26,200.
Sale Capital Tax on Depreciation Tax on Total
price Gain capital gain recevory recevory Tax
$93,600 ? ? ? ? ?
$54,600 ? ? ? ? ?
$37,400 ? ? ? ? ?
$26,200 ? ? ? ? ?
Expert Solution
Step 1: Determine the variables in the question:
Variables in the question:
New machine purchased 2 year(s) ago for $78,000
Depreciation under MACRS with a 5-year recovery period
Ordinary and capital gains tax rates=21%
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