Question

The Galley purchased some 3-year MACRS property two years ago at a cost of $19,800. The MACRS rates are 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent. The firm no longer uses this property so is selling it today at a price of $13,500. What is the amount of the after-tax profit on the sale? Assume the firm has a tax rate of 21 percent.

Answer 1

Answer:

after tax gain at disposal: $ 7,187.78

Explanation:

book value at the end of second year:

cost less depreciation of the previous years

19,800 x ( 1 - .3333 - .4444) = 19,800 (0,2223‬) = 4.401,54‬

Now, we calculate the gain considering the difference in book value and sales price:

13,500 - 4,401.54 = 9,098.46‬ gain at disposal

Last, we calculate the value after-tax

9,098.46 x ( 1 - 0.21) = 7,187.7834‬