The Golden Shades Corporation disposes a capital asset with an original cost of $280,000 and accumulated depreciation of $160,000 for a salvage price of $50,000.Silver Shades's 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 $280,000 - $160,000 = $120,000. The loss on disposal is $120,000 - $50,000 = $70,000. The tax shield from the loss is $70,000 * 40% = $28,000. The after-tax cash inflow is $50,000 + $28,000 = $78,000.

The Golden Shades Corporation Disposes a Capital Asset with an Original