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:

Neo-Marxism

An approach that applies Marxist theories and methods to contemporary issues, emphasizing culture, ideology, and the role of the state.

Urban Proletarian

A member of the working class who lives in an urban area, often associated with the industrial labor sector.

Agrarian

Relating to the cultivation of land or the agricultural sector of the economy.

Nationalistic Differences

Highlight the distinguishing beliefs, values, and practices that stem from strong identification with one's nation, leading to variations among countries.