3 Identify the primaryth described by each event below gross

3. Identify the primaryth described by each event below: gross income, depreciation, operating expense, taxable income, income tax, or net operating profit after taxes. a) A new machine had a first-year write-off of $10,500 b) A public corporation estimates that it will report a $-750,000 net profit on its annual income statement. c) An asset with a book value of $8000 was retired and sold for $8450 d) An over-the-counter software system will generate $420,000 in revenue this quarter e) An asset with a MACRS recovery period of 7 years has been owned for 10 years. It was just sold for $2750 The cost of goods sold in the past year was $3,680,200 g) A convenience store collected $33,550 in lottery ticket sales last month. Based on winners holding these tickets, a rebate of $350 was sent to the manager h) An asset with a first cost of $65,000 was utilized on a new product line to increase sales by $150,000 i) The cost to maintain equipment during the past year was $641,000

Solution

3 a)     A new machine had a first-year write-off of $10,500. Depreciation b)    A public corporation estimates that it will report a $?750,000 net profit on its annual income statement. Net operating profit after taxes c)     An asset with a book value of $8000 was retired and sold for $8450. Taxable Income d)    An over-the-counter software system will generate $420,000 in revenue this quarter. Gross Income e)     An asset with a MACRS recovery period of 7 years has been owned for 10 years. It was just sold for $2750. Taxable Income f)      The cost of goods sold in the past year was $3,680,200. Operating expense g)     A convenience store collected $33,550 in lottery ticket sales last month. Based on winners holding these tickets, a rebate of $350 was sent to the manager. Taxable Income h)    An asset with a first cost of $65,000 was utilized on a new product line to increase sales by $150,000. Gross Income i)       The cost to maintain equipment during the past year was $641,000 Operating expense 6 Without system: Taxes = 150,000(0.39) = $58,500 With system: D = $8000 I = 150,000 + 9000 – 2000 – 8000 = $149,000 Taxes = 149,000(0.39) = $58,110 Tax difference = 58,500 – 58,110 = $390 (reduction)