Tony Industries plan to sell a machine in the current tax year. The cost basispresented is RM500,000 and the accumulated depreciation is RM450,000. Theeffective income tax rate is 0.30. Determine:the minimum sold price required of the machine to gain on the disposaland(i)(ii)the revised minimum sold price required of the machine to gain on thedisposal if the effective income tax rate adjusted to 0.50 whileaccumulated depreciation increased 10 %.

There is gain on the sale of assets if the sale price exceeds the book value.

Answered: Tony Industries plan to sell a machine…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An existing asset being considered for replacement has a current MV of $12,000 and a current BV of $18,000. Determine the after-tax investment value of the existing asset (if kept) using the outsider viewpoint and an effective income tax rate of 34%.
1. A special manufacturing and handling device was purchased by Alfonso Manufacturing for $200,000 and is depreciated over MACRS. CFBT is estimated to amount to $800,000 for the first 2 years followed by $600,000 thereafter until the asset is retained. The effective tax rate, Te is 35% and interest is 10% per year. In present worth dollars determine the CFAT and determine if it was a viable purchase. (Note answer must be in a tabular format)
The following information relates to Machine Productive at 31 December 2020:RHistoric Carrying amount 400 000Fair value less cost to sell 340 000Value in Use 320 000Tax Base 300 000 Remaining useful life 4 yearsOne year later the fair value less cost to sell was R320 000 and the value in use was R380 000. Machine Productive isdepreciated on a straight-line basis. Assume that the tax rate is 28%, and a capital allowance of R100 000 was granted in 2021REQUIRED:Prepare the journal entries relating to the reversal of the impairment loss in the 2021 year of assessment
A company has purchased a machine (CCA rate 24%) at $221,000 and has a tax rate of 38.00%. By how much will the NPV change if the company is able to obtain a $15,000 salvage value for its machine at the end of the project's life in Year 10? Assume a discount rate of 8.80% and that all else remains the same.
A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.) Year MACRS % Depreciation Deduction Tax Savings PV Factor Present Values 1 33.33% 3,333.00 1,333.20 0.893 1,190.55 2 44.45% 4,445.00 1,778.00 0.797 1,417.07 3 14.81% 1,481.00 592.40 0.712 421.79 4 7.41% 741.00 296.40 0.636 188.51 100% 10,000.00 4,000.00 3,217.91 2. Given an after-tax discount rate of 12%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000?
Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax purposes as follows: year 1, $329,000; year 2, $189,000; and in each of years 3 through 5, $109,000 per year. A 10 percent discount rate is appropriate for this asset, and the company’s tax rate is 20 percent. Required: Compute the present value of the tax shield resulting from depreciation. 2. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).
The B.T. Knight Corporation is considering two mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set of after-tax net cash flows: Year Equipment A Equipment B 0 ($3,100) ($3,380) 1-3 1,426 1-4 1,204 NPV at 11% 385 355 1. Determine which model should be purchased using the Replacement Chain (RC) method. 2. Calculate the equivalent annual annuity (EAA) for each model.
A. Company Y must choose between purchasing a building for OMR 861,000 or leasing the building for four years for OMR 275,000 annual rent, paid at the beginning of each year. The purchased asset could be used for four years, after which the asset would have no salvage value. For tax purpose, the building can be depreciated using straight line method over three years. Assuming a 15% marginal tax rate and an 8% discount rate, should the company lease or purchase the building?
An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page 277), for tax purposes. The asset has an acquisition cost of $24,219,725 and will be sold for $3,275,709 at the end of the project. If the tax rate is 0.21, what is the aftertax salvage value of the asset (SVNOT)?
Easter Corporation will replace one of its assets with an updated model. The current asset was purchased two years ago at a cost of $70,000. It has been depreciated under MACRS using a five-year recovery period. The company can sell this existing asset for $30,000. The new asset is going to cost $80,000 and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40 percent on both ordinary income and capital gains, the initial investment will be equal to what amount after adjusting for taxes?
Juan Martinez, CFO of VIRMIN, S.A., is selecting the depreciation method to use fora new machine. Th e machine has an expected useful life of six years. Production is expected to be relatively low initially but to increase over time. Th e method chosen for taxreporting must be the same as the method used for financial reporting. If Martinez wantsto minimize tax payments in the first year of the machine’s life, which of the followingdepreciation methods is Martinez most likely to use?A. Straight-line methodB. Units-of-production methodC. Double-declining balance method
The company has a list of equipment they sold during the tax year. Please review the list and answer the questions below:Equipment - MACRS Year - Property Cost - Accumulated Depreciation - Sales PriceLuxury Car 5 Year Property $45,000 $20,000 $15,000Computer 5 Year Property $3,500 $1,200 $100Furniture 7 Year Property $92,000 $48,000 $40,0006. What will be the tax treatment as follows for the sale of the Luxury Cara. Calculate the Realized Gain or Lossb. What will be the character and amount of the Recognized gain?

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