Question

Romulan Co. has several old computers that originally cost $28,700 and had accumulated depreciation of $21,000....

Romulan Co. has several old computers that originally cost $28,700 and had accumulated depreciation of $21,000. The old computers could be sold as is for $8,400. Alternatively, they could be updated with new software for a total additional cost of $6,100 and sold for a higher price to a company in Italy. If Romulan sells the computers in Italy, they will have to pay a 10% export tariff (tax) based on sales revenue. Romulan decides to update the computers and sell them in Italy. Net income increases $8,200 as a result. Calculate the total sales price of the updated computers (round to the nearest $1).

          

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Answer #1
Book Value of computer = Cost - accumulated depreciation
=$28700-21000
=$7700
Book vaue after addition of software
= $7700+6100
=13800
Net Income increases by $8200
that means sales revenue would be
= Book value + Taxes +8200
Taxes = (13800+8200)/(1-0.10) *10%
=2444
Sales price =13800+8200+2444
=24444
Sales price = $24444
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