Question

Bob's Burgers purchased a new High Output Charbroiler (ie grillso they can increase the number of burgers they can cook at one time. The unit was purchased on February 12, 2017 (i.e. three years ago) for \$20.280 . The charbroiler has a useful of 10 years. This asset will be depreciated according to a 5 year MACRS scheduleBob's Burgers plans to sell this asset in November, 2020 for $8,150. If Bob's combined marginal tax rate is 27%, which of the following best represents the net proceeds from this sale?

Answer 1

Answer:

To calculate the net proceeds from sale we have to find book value of machine at the time of sale as follows:

Year	Cost of asset/Beginning cost(in$)	Depreciation%	Depreciation(in $)	Book value(in $)=Cost-Dep
17	20280	20	4056	16224
18	16224	32	5192	11032
19	11032	19.2	2118	8914
20	8914	11.52	1027	7887

Capital gain=Sale price-Book value at the time of sale=$8150-$7887=$263

Tax=Capital gain*Tax %=$263*27%=$71

Net proceeds from this sale will be $8150-$71=$8079.