Suppose a firm has an asset that originally cost $5000 and currently has accumulated depreciation of $2000. The firm is subject to a 28 per cent income tax rate. Suppose the firm sells the asset for $2000. What will be the loss without regard to taxes?

Question

Quizplus · Accepted Answer

The loss without regard to taxes is calculated as the selling price minus the book value of the asset. The book value is the original cost minus accumulated depreciation, which is $5000 - $2000 = $3000. Selling the asset for $2000 results in a loss of $3000 - $2000 = $1000.

Suppose a Firm Has an Asset That Originally Cost $5000