Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 30

Determine any depreciation recapture, capital gain, or capital loss generated by each event described below. Use them to determine the amount of income tax effect, if the effective tax rate is 35%.
a) A MACRS-depreciated asset with a 7-year recovery period has been sold prematurely after 4 years at an amount equal to 40% of its first cost, which was $150,000.
b) A hi-tech machine was sold internationally for $10,000 more than its purchase price just after it was in service 1 year. The asset had P = $100,000, S = $1000, and n = 3 years and was depreciated by the MACRS method for the 1 year.
c) Land purchased 4 years ago for $1.8 million was sold at a 10% profit.
d) A 21-year-old asset was removed from service and sold for $500. When purchased, the asset was entered on the books with a basis of P = $180,000, S = $5000, and n = 18 years. Classical straight line depreciation was used for the entire recovery period.
e) A corporate car was depreciated using MACRS over a 3-year recovery period. It was sold in the fourth year of use for $2000.