ABC Company purchased 62836 of equipment 5 years ago The equ

ABC Company purchased $62,836 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $9,339. What is the After-tax Salvage Value if the tax rate is 31 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Solution

Year 1 Year 2 Year 3 Year 4 Year 5 Total Rate 14.29% 24.49% 17.49% 12.49% 8.93% Depreciation =62836*Rate 8979 15389 10990 7848 5611 48817 Cost of Machine 62836 Accumulated Depreciation 48817 Book Value 14019 Sales value 9339 Book Value 14019 Loss on sales of Asset -4680 Tax saving on Loss 4680*31% 1451 After tax Savage value =9339+1451 10790