You Own Some Equipment That You Purchased 4 Years Ago

question 69

Multiple Choice

You own some equipment that you purchased 4 years ago at a cost of $225,000.The equipment is 5-year property for MACRS.You are considering selling the equipment today for $87,000.Which one of the following statements is correct if your tax rate is 35 percent?

• A)The tax due on the sale is $26,425.
• B)The book value today is $186,120.
• C)The accumulated depreciation to date is $38,880.
• D)The taxable amount on the sale is $38,880.
• E)The aftertax salvage value is $70,158.

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Definitions:

IFRS

A collection of accounting norms formulated by the International Accounting Standards Board (IASB), known as International Financial Reporting Standards, which are increasingly being adopted worldwide for the creation of financial statements for public companies.

Development Expenditures

Costs incurred in the research and development of new products or services, which are often capitalized and amortized over time.

Expected Benefit Approach

A method used in accounting for pensions that allocates the cost of pensions over the years during which employees earn their pension benefits.

Discounted Present Value

A valuation method that calculates the current worth of a future cash flow, taking into account the time value of money.