A Corporation Is Selling an Existing Asset for $21,000

question 40

Multiple Choice

A corporation is selling an existing asset for $21,000. The asset, when purchased, cost $10,000, was being depreciated under MACRS using a five-year recovery period, and has been depreciated for four full years. If the assumed tax rate is 40 percent on ordinary income and capital gains, the tax effect of this transaction is ________.

• A) $0 tax liability
• B) $7,560 tax liability
• C) $4,400 tax liability
• D) $7,720 tax liability

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Definitions:

Peripheral Model

A theory in urban sociology suggesting that urban areas are composed of an inner city surrounded by large suburban residential and business areas tied together by a beltway or ring road.

Concentric Zones

A sociological model that divides cities into circular areas with varying social characteristics, originating from the work of Ernest Burgess.

Cities

Urban areas with high population density and infrastructure, serving as centres of politics, economics, culture, and social interactions.

Population Replacement Levels

The fertility rate at which a population exactly replaces itself from one generation to the next, without migration.