In year 1, Firm A paid $47,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $2,920 and $6,400 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Required: a. Compute Firm A's net cash flow attributable to the asset purchase in each year. b. Compute Firm A's adjusted basis in the asset at the end of each year.
In year 1, Firm A paid $47,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $2,920 and $6,400 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Required: a. Compute Firm A's net cash flow attributable to the asset purchase in each year. b. Compute Firm A's adjusted basis in the asset at the end of each year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Firm A's adjusted basis in the asset at the end of each year.
Adjusted basis at end of Year 1
Adjusted basis at end of Year 2
Amount
< Required A
Required B >
Transcribed Image Text:In year 1, Firm A paid $47,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $2,920 and $6,400
depreciation with respect to the asset. Firm A's marginal tax rate in both years was 21 percent.
Required:
a. Compute Firm A's net cash flow attributable to the asset purchase in each year.
b. Compute Firm A's adjusted basis in the asset at the end of each year.
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Firm A's net cash flow attributable to the asset purchase in each year.
Note: Cash outflows should be indicated by a minus sign. Round your intermediate calculations and final answers to nearest
whole dollar amount.
Before-tax cash flows
Tax (cost) or savings
Net cash flow
$
Year 1
0
▶
$
Year 2
0
< Required A
Required B >
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