The Fortive Corporation disposes a capital asset with an original cost of $180,000 and accumulated depreciation of $111,000 for $56,000.Alpha betas tax rate is 40%.Calculate the after-tax cash inflow from the disposal of the capital asset.

Question

Quizplus · Accepted Answer

To calculate the after-tax cash inflow from the disposal of the capital asset, we need to determine the gain or loss on the sale.

Proceeds from the sale = $56,000 
Carrying amount of the asset = Original cost - Accumulated depreciation 
Carrying amount of the asset = $180,000 - $111,000 = $69,000

Since the proceeds from the sale are less than the carrying amount, there is a loss on the sale:

Loss on sale = Proceeds - Carrying amount 
Loss on sale = $56,000 - $69,000 = ($13,000)

Now, we can calculate the tax impact on the loss:

Tax savings = Loss on sale x Tax rate 
Tax savings = ($13,000) x 0.4 = ($5,200)

Finally, we can calculate the after-tax cash inflow by adding the proceeds from the sale to the tax savings:

After-tax cash inflow = Proceeds + Tax savings 
After-tax cash inflow = $56,000 + ($5,200) = $61,200

Therefore, the best choice is C, $61,200.

The Fortive Corporation Disposes a Capital Asset with an Original