The Alpha Beta Corporation disposes a capital asset with an original cost of $170,000 and accumulated depreciation of $109,000 for $50,000. Alpha betas tax rate is 40%. Calculate the after-tax cash inflow from the disposal of the capital asset.

Question

Quizplus · Accepted Answer

The book value of the asset is ($170,000 - $109,000) = $61,000.
The company incurred a loss of ($61,000 - $50,000) = $11,000 from the sale of the asset.
The tax savings from the loss = $11,000 x 40% = $4,400.
The after-tax cash inflow = Sale price + tax savings from the loss = $50,000 + $4,400 = $54,400. Therefore, the correct option is (C)

The Alpha Beta Corporation Disposes a Capital Asset with an Original