A Firm Is Selling an Existing Asset for $5,000

question 51

Multiple Choice

A firm is selling an existing asset for $5,000. 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) $1,320 tax liability
• C) $1,160 tax liability
• D) $2,000 tax benefit

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Definitions:

Leukapheresis

A medical procedure that involves the separation and removal of white blood cells from the blood.

Erythrocyte Sedimentation Rate (ESR)

A blood test that measures how quickly erythrocytes (red blood cells) settle at the bottom of a test tube that contains a blood sample.

Hematocrit (HCT)

A test measuring the proportion of red blood cells in the blood, indicating overall health and possible conditions like anemia.

Erythropoietin

A hormone produced by the kidneys that promotes the formation of red blood cells by the bone marrow.