Benson Co Purchases an Asset for $6,000

question 35

Essay

Benson Co. purchases an asset for $6,000. This asst qualifies as a seven-year recovery asset under MACRS. Benson has a tax rate of 30%. The seven-year expense percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. If the asset is sold at the end of six years for $2,000, what is the cash flow from disposal?

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Definitions:

Limited Liability

A legal principle that limits the financial liability of company owners to the amount they've invested in the business, protecting personal assets from company debts and obligations.

Equally Liable

A condition under which multiple parties are held jointly responsible to the same extent for a legal obligation or debt.

LLC Member

An owner or part-owner of a Limited Liability Company, who contributes to the business and shares in its profits and losses.

Operation of Law

Legal changes or transfers that happen automatically due to existing laws rather than through an agreement or court order.