Answer:
E. $131667.47
Explanation:
For computing the after-tax salvage value , we need to do the following calculations:
1. Determine the book value:
= (Original cost of equipment) - (original cost of equipment × depreciation percentage for four years)
= ($697,400) - ($697,400 × 82.72%)
= $697,400 - $576,889.28
= $120,510.72
2. Determine the profit or loss on sale of equipment:
Profit = Sale value - Book value
= $135,000 - $120,510.72
= $14,489.28
3. Determine the tax on profit on sale of equipment:
= Profit × tax rate
= $14,489.28 × 23%
= $3,332.53
4. Now finally calculation of the after-tax salvage value is shown below:
= Salvage value - profit tax
= $135,000 - $3,332.53
= $131667.47
