Question

If there is a difference between the salvage and book value of an asset, there will be a tax implication to the sale.

Group of answer choices

True

False

Answer 1

TRUE

There will be a tax implication to the sale, when the salvage value is different from the book value of an asset.

Example: Book value of the asset = $100,000

Salvage value of the asset = $120,000

The tax rate is 30%

Salvage value > Book value

The company will have to pay a tax on the difference amount between the salvage value and the book value of asset

Tax amount = (120,000 - 100,000) * 0.30

Tax amount = $6,000

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