A machine was sold in December 20x3 for $9,000. It was purchased in January 20x1 for $15,000, and depreciation of $12,000 was recorded from the date of purchase through the date of disposal. Assuming a 40% income tax rate, the after-tax cash inflow at the time of sale is:

Question

Quizplus · Accepted Answer

The after-tax cash inflow can be calculated by first determining the gain or loss on the sale of the machine. The machine's book value at the time of sale is its original cost ($15,000) minus accumulated depreciation ($12,000), which equals $3,000. The sale price ($9,000) minus the book value ($3,000) results in a gain of $6,000. The tax on the gain is 40% of $6,000, which equals $2,400. Therefore, the after-tax cash inflow is the sale price ($9,000) minus the tax on the gain ($2,400), which equals $6,600.

A Machine Was Sold in December 20x3 for $9,000