Question

ABC, Inc purchased some new machinery three years ago for $270,743. Today, it is selling this machinery for $40,214. What is the After-tax Salvage Value of the new machinery? Assume that the tax rate is 29%. The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

Answer 1

	Particulars	Amount
a	Sale proceeds	40,214
b	Less: net book value	77,974
c=a-b	Gain/(loss) on disposal	-37,760
d= c*29%	tax benefit@ 29%	-10,950
e= c-d	After tax salvage value	-26,810
	Net book value
	Particulars	Amount
	cost of asset	2,70,743
	Less: accumulated depreciation	1,92,769
	Net book value	77,974
	Accumulated depreciation
	Cost	2,70,743
	Depreciation for 3 years:
	1st year rate	20%
	2nd year rate	32%
	3rd year rate	19.2%
	Total depreciation taken	71.2%
	Depreciation amount	1,92,769