Question

A corporation bought a machine 5 years ago for $144,000 and sold it today for $55,000....

A corporation bought a machine 5 years ago for $144,000 and sold it today for $55,000. The machine was being depreciated to a zero salvage value using straight-line method over 8 years. If the firm’s tax rate is 34%, what is the tax effect of the sale?

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Answer #1

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Calculation of Tax Effect on Sale :

Particulars Amount

Sale Value $55,000

Less: Book value at the end of Year 5 ($54,000)

Profit on sale $1,000

Less; Tax rate @34% ($340)

Profit after tax $660

Tax effect on sale is $340

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