An in-place machine with B= $165,000 was depreciated by using Modified Accelerated Cost Recovery System (MACRS) over a 3-yearperiod. The machine was sold for $60,000 at the end of year 2 when the company decided to import the item that required the use ofthe machine. In year 2, gross income (Gl) = $1 million and operating expenses (OE) = $500,000. Determine the tax liability in year 2 ifTe = 35%.The tax liability in year 2 is determined to be $

In MACRS there is more depreciation during initial years of equipment purchase and depreciation goes…

Answered: riod. The machine was sold for $60,000…

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section: Chapter Questions

Problem 1CP

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The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,400, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,400/6 = $400 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would…
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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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riod. The machine was sold for $60,000 at the end f year 2 when the company decided to import the item th e machine. In year 2, gross income (GI) = $1 million and operating expenses (OE) = $500,000. Determine the ta = 35%.