Bill Sharpe,owner of Sharper Knives Inc.,is closing his business at the end of the current fiscal year.His sole asset,the knife-sharpening machine,is three years old.A depreciation table for the asset is shown below.Bill has agreed to sell the machine at the end of the year for $100,000.What is the impact on taxes from the sale of the machine? (Assume that Sharper Knives claimed a regular depreciation expense in the calculation of income taxes.)The tax rate is 35%.Round your answers to the nearest dollar.
Depreciation Table for Knife Sharpener

Question

Quizplus · Accepted Answer

Tax on sale = T × (S - B)
We need the book value of the machine at the end of year 3: 11ea7fdb_fc77_17ac_a768_bdc4ff215aee_TB2902_11 = $250,000 - $140,675 = $109,325
Tax on sale = 0.35 × ($100,000 - $109,325) = -$3,264
A negative number implies a refund from the IRS.