Suppose a Firm Has an Asset That Originally Cost $5000

question 66

Multiple Choice

Suppose a firm has an asset that originally cost $5000 and currently has accumulated depreciation of $2000. The firm is subject to a 28 per cent income tax rate. Suppose the firm sells the asset for $2000. What will be the loss without regard to taxes?

• A) ($1000)
• B) ($3000)
• C) ($1120)
• D) ($2000)

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Definitions:

Stockholders' Equity

Stockholders' Equity represents the ownership interest of shareholders in a corporation, calculated as the company's total assets minus its total liabilities.

Liability

A financial obligation or debt owed by a company to third parties, such as loans, accounts payable, or mortgages.

Date of Declaration

The official date on which a company's board of directors announces its intention to pay a dividend.

Issued Shares

Represents the total number of shares that have been allocated by a corporation and are held by shareholders, including both public investors and company officers or insiders.