Needles Corporation recently sold a used machine for $40,000.The machine had a book value of $60,000 at the time of the sale.What is the after-tax cash flow from the sale,assuming the company's marginal tax rate is 20 percent?

Question

Quizplus · Accepted Answer

The company sold the machine for $40,000 which is less than its book value of $60,000, resulting in a loss of $20,000. The after-tax cash flow from the sale can be calculated as:
Sale proceeds - (book value - sale proceeds) x tax rate
= $40,000 - ($60,000 - $40,000) x 0.2
= $40,000 - $4,000
= $36,000
Therefore, the after-tax cash flow from the sale is $36,000 or option C.

Needles Corporation Recently Sold a Used Machine for $40,000