Question

The Alpha Beta Corporation disposes a capital asset with an original cost of​ $170,000 and accumulated depreciation of​ $109,000 for​ $50,000. Alpha betas tax rate is​ 40%. Calculate the​ after-tax cash inflow from the disposal of the capital asset. A. ​$63,000 B. ​$4,400 C. ​($4,400) D. ​$54,400

Answer 1

Answer:

Option D) $54.400

Explanation:

When  a company disposes a capital asset, the cost of the asset it's the remanent value, that is the difference between the original cost less the accumulated depreciation, in this case $170.000 minus $109.000, remanent value is $61.000.

This value it's the cost of sale and the price it's $50.000 , the result of this transaction it's a loss of ($11.000) so the after-tax cash inflow it's ($4.400).

The total Cash Inflow it's the sum of $50.000 (gained from the sale) and the save on taxes for $4.400, because of the loss I get a payback on taxes, the total is $54.400.