Question

A firm has a machine it can sell for $50,000. The book value of the machine is $20,000 at the moment. If the firm sells the machine today, what is the tax implication from the sale? Assume that the tax rate is 40%. Round to the nearest penny. If tax liabilities, type a negative sign in front. Do not include a dollar sign in your answer.

Answer 1

Answer:

-12,000.00

Explanation:

Tax implication from the sale = ($50000 - $20000)*40%  

Tax implication from the sale = $30,000 * 40%

Tax implication from the sale = 12,000

Now, as there is capital gain, so that means the company will have to pay taxes of 12,000. So, this is a liability of 12,000 which means the answer is = -12,000.00