A plant asset with a book value of $320,000 is sold for $560,000.The tax rate is 20%.What is the net after-tax cash inflow resulting from this sale?

Question

Quizplus · Accepted Answer

The net after-tax cash inflow is calculated by subtracting the tax on the gain from the sale proceeds. The gain on sale is $560,000 (sale proceeds) - $320,000 (book value) = $240,000. The tax on the gain is 20% of $240,000 = $48,000. Therefore, the net after-tax cash inflow is $560,000 (sale proceeds) - $48,000 (tax on gain) = $512,000.

A Plant Asset with a Book Value of $320,000 Is