Shamus Corp. sold a piece of equipment for $80,000. The asset originally cost $272,000, and accumulated depreciation on the equipment at the date of sale was $174,400. What is the after-tax cash inflow (outflow) from the sale of the equipment, assuming the income tax rate is 40%?

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Quizplus · Accepted Answer

The book value of the equipment is $272,000 - $174,400 = $97,600. The loss on sale is $97,600 - $80,000 = $17,600. The tax savings from the loss is $17,600 * 40% = $7,040. The after-tax cash inflow is $80,000 + $7,040 = $87,040.