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Talia’s Tutus bought a new sewing machine for $55,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line. Required: a. Find the depreciation charge each year. b. If the sewing machine is sold after 3 years for $25,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?

Answer :

Samawati

Answer:

$8,528

Explanation:

A

The double-declining method uses twice the rate of the straight-line depreciation method.

For Talia's tutu, the straight-line method will be 1/5 x 100

=0.2 x 100

=20%

The double-declining method will use 40%

The depreciation schedule for three years will be as follows for 5 years is as follow

Opening balance Depreciation amount new Book value

$55,000   $22,000   $33,000

$33,000    $13,200    $19,800

$19,800    $7,920    $11, 880

$11,880    $4,752    $ 7,128

$7,128    $,2,851.2   $,4,276.8

B.

If the asset is sold after three years.

The Book value after 3 years = $11,880

The machine is sold for $25,000

the gross profits from the machine

= $25,000 - $11,880

=$13,120

the tax rate =35%

=35/100 x $13,120

=0.35 x $13,120

=$4,592

net realized = $13,120 - $4,592

= $8,528

The Correct Answer is:  $8,528

A .  when The double-declining method is used twice the rate of the straight-line depreciation method.

  • After that For Talia's tutu, the straight-line method will be 1/5 x 100
  • Then =0.2 x 100
  • Now =20%
  • When The double-declining method will use that is 40%
  • So that The depreciation schedule for three years will be as follows for 5 years is as follow
  • Now the Opening balance Depreciation amount new Book value will be:
  • Then $55,000   $22,000   $33,000
  • Then $33,000    $13,200    $19,800
  • Now $19,800    $7,920    $11, 880
  • When the $11,880    $4,752    $ 7,128
  • Now $7,128    $,2,851.2   $,4,276.8

B. When If the asset is sold after three years are:

  • So that The Book value after 3 years = $11,880
  • Now The machine is sold for $25,000
  • Then the gross profits from the machine will be:
  • After that = $25,000 - $11,880
  • Then =$13,120
  • the tax rate =35%
  • =35/100 x $13,120
  • =0.35 x $13,120
  • =$4,592
  • Then the net realized = $13,120 - $4,592
  • After that the = $8,528

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