Please include all the steps Use the special Depreciation/Tax/CapGain template p
ID: 2457442 • Letter: P
Question
Please include all the steps Use the special Depreciation/Tax/CapGain template provided in the BlackBoard content (Homework-related) folder, plus the MACRS and Federal Tax Tables (no state taxes involved) in your textbook, to evaluate the following situation. Assume a Capital Gains tax rate of 28% (flat rate). A start-up small business purchases 3 depreciable assets to begin business operations: Asset 1: Office Furnishings (depreciable by the S/L Method over 10 years) at initial cost of $5,200 Asset 2: Mildly Used Manufacturing Equipment (7-year MACRS Asset) at total initial cost of $125,000 plus $35,000 to refurbish to bring to proper safety standards Asset 3: New Delivery Vehicle (6-year SOYD Asset) at total initial cost of $28,500 The company conducts its business for 3 years, earning the following Gross Income less Expenses. Because of a declining income stream, they decide to exit this business and seek different business opportunities. They liquidate all three assets at the end of year 3 for the sales proceeds listed below.Explanation / Answer
YEAR GROSSINCOME LESS EXPENSES DEPRECIATION TAXABLE INCOME TAX OWED AFTER TAX INCOME BOOK VALUE ASSET1 BOOK VALUE ASSET2 BOOK VALUE ASSET3 1 190500 31520 158980 45252 113728 4680 137143 20357 2 290000 46490 243510 78219 165291 4160 97959 13571 3 108000 33937 74063 13515 60548 3640 69971 8142 BEFORE TAX ROR 588500 339567 NAME OF AN ASSET SALE PROCEEDS BOOK VALUE AT TIME OF SALE TAXABLE CAPITAL GAIN AMOUNT CAP GAINS TAX OWED NET INCOME FROM SALE ASSET1 4400 3640 760 213 547 ASSET2 95100 69971 25129 7036 18093 ASSET3 16600 8142 8458 2368 6090