You acquire a grinder priced al $65,000 by trading in a similar grinder andpaying cash for the remaining balance. Assuming that the trade-in allowanceis $11,000 and the book value of the asset traded in is $12,000, what is the cost basis of the new grinder for the computation of depreciation for tax purposes?
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You acquire a grinder priced al $65,000 by trading in a similar grinder and
paying cash for the remaining balance. Assuming that the trade-in allowance
is $11,000 and the book value of the asset traded in is $12,000, what is the cost basis of the new grinder for the computation of depreciation for tax purposes?
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- (d) If the old machine is sold for $5,000 now instead of $2,500, what would be the amount of the gains tax?(e) If the old machine had been depreciated by 175% DB and then by a switch to SL depreciation, what would be the current book value?(f) If the old machine were not replaced by the new one and has been depreciated by the 175% DB method, when would be the time to switch from DB to SL depreciation'?If an item is capitalized why do you think different depreciation methods are allowed? Does the depreciation method chosen impact Net Income in the short term? What about over the life of the asset? Assume you have an asset with original cost of $150,000 and accumulated depreciation of $30,000 when you spend $10,000 on the asset. If the $10,000 is an ordinary repair what is the Book Value Before and the Book Value after the $10,000 expenditure? If the $10.000 expenditure is an Extraordinary Repair (extends the life of the asset) and is recorded as a debit to Accumulated Depreciation and a credit to Cash What is the Book Value Before and the Book Value after the $10,000 expenditure? if the expenditure is a Betterment (improves the function of the asset) and is recorded as a debit to the asset and a credit to Cash. What is the Book Value Before and the Book Value after the $10,000 expenditure?An asset that cost $20,000 and on which depreciation of $15,000 has been recorded is traded in on a new replacement asset. The sales price, also the fair value, of the new asset is $27,000. The owner of the old asset was given an allowance of $7,000 for the old asset and paid $20,000 in cash. For financial accounting purposes, what is the amount of gain or loss recorded? Question 5 options: a. a gain of $2,000 b. no gain or loss c. a loss of $2,000 d. a gain of $7,000
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- Dungan Corporation is evaluating a proposal to purchase a new drill press to replace a less efficient machine presently in use. The cost of the new equipment at time 0, including delivery and installation, is $260,000. If it is purchased, Dungan will incur costs of $7,400 to remove the present equipment and revamp its facilities. This $7,400 is tax deductible at time 0. Depreciation for tax purposes will be allowed as follows: year 1, $64,000; year 2, $94,000; and in each of years 3 through 5, $54,000 per year. The existing equipment has a book and tax value of $124,000 and a remaining useful life of 10 years. However, the existing equipment can be sold for only $64,000 and is being depreciated for book and tax purposes using the straight-line method over its actual life. Management has provided you with the following comparative manufacturing cost data. Present Equipment New Equipment Annual capacity (units) 424,000 424,000 Annual costs: Labor $ 60,000…*Note: These amounts are used for depreciation calculations. Assume further that Mendoza is subject to a 3 0% income tax, both for ordinary income and gains/losses associated with disposal of machinery, and that all cash flows occur at the end of the year, except for the initial investment. Assume that straight-line depreciation is used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time of the related transaction. Required: Determine relevant cash flows (after-tax) at time of purchase of the new machine (i.e., time 0: January 1, 2019). Determine the relevant (after-tax) cash inflow each year of project operation (i.e., at the end of each of years 1 through 5). Determine the relevant (after- tax) cash inflow at the end of the project's life (i.e., at the project's disposal time, December 31, 2023). Determine the undiscounted net cash flow (after tax) for the new machine and determine whether on this basis the old machine should be…Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the assets book value. What amount will be recorded as depreciation expense each year, and what will the book value be at the end of each year after depreciation is recorded?
- Pet Supply purchased fixed assets two years ago at a cost of $43,800. It no longer needs the assets, so it is going to sell them today for $32,500. The assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. What is the net cash flow from the sale if the tax rate is 35%?A machine has a carrying amount of 100. For tax purposes, depreciation of 30 has already been deducted from taxable profit in prior periods and an amount of 70 will be deductible in future periods, either as depreciation or through a deduction on disposal. Revenue generated by using the machine is taxable, any gain on disposal of the machine will be taxable and any loss on disposal will be deductible for tax purposes. What is the tax base of the machine? a. 100 b. 70 c. 30 d. 0KNB sold real property to Firm P for $15,000 cash and Firm P’s assumption of the$85,000 mortgage on the property.Required: What is KNB’s amount realized on the sale?b. Compute KNB’s after-tax cash flow from the sale if its adjusted basis in the realproperty is $40,000 and its marginal tax rate is 35 percent.