Eastern Inc

question 30

Multiple Choice

Eastern Inc.purchases a machine for $15,000.This machine qualifies as a five-year recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%.Eastern has a tax rate of 20%.If the machine is sold at the end of four years for $4,000,what is the cash flow from disposal?

• A)$3,718.40
• B)$3,535.36
• C)$2,592.00
• D)$1,408.00

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Definitions:

Non-Controlling Interest

The equity in a subsidiary not attributable directly or indirectly to the parent company, often shown separately in the consolidated financial statements.

Carrying Value

The amount at which an asset or liability is recognized in the balance sheet, considering depreciation, amortization, or impairment.

Unamortized Premium

The portion of the bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Par-Value Approach

An accounting method that assigns a nominal value to the shares of a corporation, which may bear no correlation to the market value of those shares.