Problem $1$

A $$500,000$ asset has been depreciated with the straight$-$line method over an eight$-$year life. The

estimated salvage value was $$80,000.$ At the end of the sixth year, the asset was sold for $$210,000.$

$($a$)$ What is the estimated book value after $6$ years, based on depreciation? What is the calculated

difference between book value and sold market value for the asset? $($Round both answers to the

nearest dollar.$)$

$($b$)$ Which of the following occurred: Recaptured Depreciation, Loss on Disposal, or Capital Gain?

$($c$)$ If this method of depreciation were allowed under tax law, and a tax rate of $33\%$ applied, how

much tax would be owed or credited to the firm due to the sale of the asset?