Question

Vegas Pub has a pizza oven with a book value of $5,000 that can be sold for $6,000 (market value). Determine the pizza oven’s after-tax salvage value if Vegas’ tax rate is 30%. Group of answer choices $5,000 $5,700 $4,200 $6,000 CHEGG

Answer 1

Answer:

Salvage value= $5,700

Explanation:

Giving the following information:

Book value= $5,000

Market value= $6,000

The company will gain from selling the asset if the market value is higher than the book value. It will pay taxes for the difference between book value and selling price.

Tax= (6,000 - 5,000)*0.3= $300

Salvage value= Selling price - tax

Salvage value= 6,000 - 300= $5,700