Burke Shoes sold machinery with a cost of $96,300 and accumulated depreciation of $54,200 for $32,500 cash.If Burke's income tax rate is 30%,the after-tax cash inflow from the sale of the machinery was:

Question

Quizplus · Accepted Answer

The after-tax cash inflow from the sale of the machinery can be calculated by first determining the gain or loss on the sale, then calculating the tax effect, and finally adjusting the cash received from the sale by this tax effect. The machinery had a book value of $96,300 (cost) - $54,200 (accumulated depreciation) = $42,100. It was sold for $32,500, resulting in a loss of $42,100 - $32,500 = $9,600. The tax benefit from this loss is $9,600 * 30% = $2,880. Therefore, the after-tax cash inflow is the cash received plus the tax benefit: $32,500 + $2,880 = $35,380.

Burke Shoes Sold Machinery with a Cost of $96,300 and Accumulated