A Corporation Is Selling an Existing Asset for $1,700

question 112

Multiple Choice

A corporation is selling an existing asset for $1,700. 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) $840 tax liability
• C) $3,160 tax liability
• D) $3,160 tax benefit

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Definitions:

mRNA

Messenger RNA, a type of RNA that carries instructions from DNA for the synthesis of proteins.

Transcription

The procedure that involves copying the details from a DNA strand into a newly formed molecule of messenger RNA (mRNA).

Translation

The process in molecular biology whereby the genetic code carried by mRNA is decoded to produce the specific sequence of amino acids in a polypeptide chain.

Messenger RNA

A type of RNA that carries genetic information from DNA to the ribosome, where proteins are synthesized.