Book value and taxes on sale of assets Troy Industries purchased a new machine 5 years ago for S76 000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 40% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $91,200; $53,200; $3,800; and $2,700 a. The remaining book value is S. (Round to the nearest dollar.) b. Calculate the firm's tax liability for each case: (Round to the nearest dollar.) Sale Capital Tax on Depreciation Tax on Total Recovery Price Gain Capital Galn Recovery Tax 91,200 S (Round to the nearest dollar.) Sale Price Capital Tax on Depreciation Tax on Total Capital Gai Recovery Recovery Gain Tax 53,200 S (Round to the nearest dollar.) Sale Price Total Capital Gain Tax on Depreciation Tax on Capital Gain Recovery Recovery Tax 3,800 S (Round to the nearest dollar.) Sale Capital Tax on Depreciation Tax on Total Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* 3 years 33% 45 15% 7% 5 years 20% 32010 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 5% 5% 4% 100% Recovery year 2 3 4 6 7 8 10 Totals 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. Book value and taxes on sale of assets Troy Industries purchased a new machine 5 years ago for S76 000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 40% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $91,200; $53,200; $3,800; and $2,700 a. The remaining book value is S. (Round to the nearest dollar.) b. Calculate the firm's tax liability for each case: (Round to the nearest dollar.) Sale Capital Tax on Depreciation Tax on Total Recovery Price Gain Capital Galn Recovery Tax 91,200 S (Round to the nearest dollar.) Sale Price Capital Tax on Depreciation Tax on Total Capital Gai Recovery Recovery Gain Tax 53,200 S (Round to the nearest dollar.) Sale Price Total Capital Gain Tax on Depreciation Tax on Capital Gain Recovery Recovery Tax 3,800 S (Round to the nearest dollar.) Sale Capital Tax on Depreciation Tax on Total Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* 3 years 33% 45 15% 7% 5 years 20% 32010 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 5% 5% 4% 100% Recovery year 2 3 4 6 7 8 10 Totals 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention
