Grove Pretzel is replacing an old pretzel oven with a new one.The oven is being sold for $25,000 and it has a net book value of $75,000.Assume that Grove Pretzel is in the 34% income tax bracket.How much will Grove Pretzel net from the sale?
A)$61,000
B)$55,000
C)$75,000
D)$42,000

Question

Quizplus · Accepted Answer

The loss on the sale is $50,000 ($75,000 net book value - $25,000 sale price). The tax benefit from the loss is $17,000 ($50,000 loss * 34% tax rate). Therefore, the net amount from the sale is $42,000 ($25,000 sale price + $17,000 tax benefit).

Grove Pretzel Is Replacing an Old Pretzel Oven with a New