The cash inflow effect of a disposal at a loss is equal to the
A) amount of the loss plus the tax savings.
B) amount of the loss minus the tax savings.
C) selling price plus the tax savings.
D) selling price minus the tax savings.

Question

Quizplus · Accepted Answer

When an asset is disposed of at a loss, the cash inflow effect is the selling price plus the tax savings from the loss, as the loss can reduce taxable income, resulting in tax savings.

The Cash Inflow Effect of a Disposal at a Loss