Question

5. A company is buying machinery for their manufacturing floor that is worth $655,000. The machinery...

5. A company is buying machinery for their manufacturing floor that is worth $655,000. The machinery has a service life of 7 years. Develop a depreciation table for this asset according to MACRS. What will be the tax implications if they decide to sell this machinery in year 5 for $100,000?

Homework Answers

Answer #1

Answer :

* If asset is sold beginning of year 5 or end of year 5 there is capital loss

* Capital loss is due to excess of book value over selling price of machinery

------END-----------

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A manufacturing firm purchases some machinery in January for $1,000,000. The machinery has an estimated life...
A manufacturing firm purchases some machinery in January for $1,000,000. The machinery has an estimated life of 5 years, with an estimated salvage value of $200,000. The use of this machinery should generate $400,000 before-tax profit each year over its 5-year useful life. Calculate the before-tax and after-tax rates of return if the company uses declining balance at 150% to depreciate their assets. Also present a cash flow diagram.
The machinery costs $200,000, and is to be depreciated using the MACRS, as a 5 year...
The machinery costs $200,000, and is to be depreciated using the MACRS, as a 5 year asset. This company uses tax rate of 34% for studies, and the machine is in use for 10 years. If the machine is sold for $80,000 in the 4th year, Note that there are multiple questions based on this problem. How much is the loss(-) or gain(+) from the sale?
A company is considering buying a new piece of machinery that costs $20,000 and has a...
A company is considering buying a new piece of machinery that costs $20,000 and has a salvage value of $6,000 at the end of its 5-year useful life. The machinery nets $5,000 per year in annual revenues. The internal rate of return (IRR) on this investment is between__________. A. 10%-11% B. 12%-13% C. 14%-15% D. 13%-14% E. None of the above
The machinery costs $200,000, and is to be depreciated using the MACRS, as a 5 year...
The machinery costs $200,000, and is to be depreciated using the MACRS, as a 5 year asset. This company uses tax rate of 34% for studies, and the machine is in use for 10 years. If the machine is sold for $80,000 in the 4th year, Note that there are multiple questions based on this problem. How much is the impact of this sale on ATCF (-/+) in the 4th year from the sale? (Due to loss or gain from...
A.You just purchased some equipment for $100,000. If the salvage value is $20,000, and you decide...
A.You just purchased some equipment for $100,000. If the salvage value is $20,000, and you decide to depreciate it straight-line in 5 years, what’s the annual depreciation? and what’s the book value after 5 years? If you decide to depreciate with 5-year MACRS schedule, what’s the annual depreciation, and what’s the book value after 5 years? If you decide to depreciate with 7-year MACRS schedule, what’s the annual depreciation for the first 5 years, and what’s the book value after...
Show Working- Dana forms a small manufacturing company. Her company places the following ng properties into...
Show Working- Dana forms a small manufacturing company. Her company places the following ng properties into service during the year, on the dates indicated: Type of property                        Date placed in service               Cost_____ Business building                      April 6                                      $275,000 Furniture                                  June 5                                      $57,000 Machinery                                September 2                             $65,000 Computer                                 December 27                            $25,000 She chooses not to do any Section 179 expense, and also elects not to take bonus depreciation.   She...
On July 1 of the current year, Jeremiah Company purchased and placed into service factory machinery...
On July 1 of the current year, Jeremiah Company purchased and placed into service factory machinery to be used in its operations.  The machinery cost $150,000 and qualifies as 7-year MACRS property.  The machines were the only assets placed into service during the year.  Jeremiah elects to expense the maximum under bonus depreciation and nothing under Section 179.  The company’s taxable income before any deduction related to the machines is $80,000.  Assume the depreciation table percentages are 14.29% for Year 1 and 24.49% for Year...
On January 1, 2019, Delta Company acquired new equipment with an estimated useful life of 5...
On January 1, 2019, Delta Company acquired new equipment with an estimated useful life of 5 years. Cost of the equipment was $5,000,000 with a residual value of $250,000. For income tax purposes, this machinery qualifies as 5-Year property. 3 Years Year 1 Year 2 Year 3 Year 4 MACRS Rates 33.33% 44.45% 14.81% 7.41% Instructions Compute the amounts of depreciation recognized in each of first 4 years (2019, 2020 & 2021) under each of the depreciation methods listed below....
lake company purchased manufacturing equipment five years ago at a cost of $340000. Freight cost was...
lake company purchased manufacturing equipment five years ago at a cost of $340000. Freight cost was $25000 and installation cost $55000. Lake company depreciates the equipment as a 7-YEAR class MACRS asset. a) What is the cost basis of the asset? b) What was the depreciation expense for year 4? c) If the asset is disposed of the end of year 5, what is its cook value? d) Calculate the gain or loss on the asset disposal if the asset...
Veda Company bought a machine for $7,000. Its estimated life is 5 years. The residual value...
Veda Company bought a machine for $7,000. Its estimated life is 5 years. The residual value of the machine is $500. Veda uses the declining-balance method at twice the straight-line rate. Calculate the first two years’ depreciation expense. (a.) Year 1 Depreciation Expense (b.) Year 2 Depreciation Expense For tax purposes, Veda has requested the accountant to calculate what the depreciation expense will be for the class 5 piece of machinery over the first 3 years using MACRS. (a.) Year...