Question

26. ABC Inc. plans to sell an asset for $23,000. The asset was acquired 5 years ago for $50,000 and was depreciated using the straight-line method with an expected life of 5 years. If ABC’s tax rate is 21%, then the taxes owed on the sale will be:

:

A   $2,000

B   $3,00

C   $4,100

D   $5,200

E    None of the above

Answer questions 27-30 using the following data:

      eFirm inc. paid a quarterly dividend of $0.15 per share in May 2019. Important dividend-related events happened on the following dates. Answer questions 27-30 using this information.

A. Wednesday, May 8, 2019

B. Wednesday, April 17, 2019

C. Tuesday, April 16, 2019

D. Tuesday, April 2, 2019

27. The ex-dividend date was…
28. The dividend declaration date was…
29. The dividend payment date was…
30. The holder-of-record date was …

Answer 1

26. Depreciation each year = 50,000/5 = $10,000

Book value at the end of 5 years = 50,000 - 10,000 * 5 = 0

If the asset is sold for $23,000, then the gain = Selling price - book value

Gain = 23,000 - 0 = $23,000

Tax on gain = 23,000 * 0.21

Tax on gain = $4,830

The correct answer is option E. None of the above

27. The following events occur in the given order

1. The dividend declaration date: Tuesday, April 2, 2019. (Always the announcement happens first)
2. The ex-dividend date: Tuesday, April 16, 2019 (The day stock goes ex-dividend)
3. The holder-of-record date: April 17, 2019 (One day after the stock goes ex-dividend)
4. The dividend payment date: Wednesday, May 8, 2019 (This completes the process)