Answer:
$10,620
Explanation:
Depreciation for Year 1 = 0.202 × $50,000
= $10,100
Depreciation for Year 2 = 0.323 × $50,000
= $16,150
Depreciation for Year 3 = 0.194 × $50,000
= $9,700
Depreciation for Year 4 = 0.125 × $50,000
= $6,250
Accumulated depreciation = $10,100 + $16,150 + $9,700 + $6,250
= $42,200
Book value of machine as on date of sale:
= Purchase price - Accumulated depreciation
= $50,000 - $42,200
= $7,800
Selling price = $12,500
Gain on sale of machine = $12,500 - $7,800
= $4,700
Tax rate = 40%
Tax on capital gain = $4,700 × 0.40
= $1,880
Net proceeds on sale of machine:
= Selling price – Tax paid on capital gain
= $12,500 - $1,880
= $10,620
