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18 July, 01:58

Phantom Corporation purchased equipment for $50,000, four years ago. The accumulated depreciation to date is $41,360. If they were able to sell the equipment today for $20,000, what would be the amount of tax due

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  1. 18 July, 02:01
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    The correct answer is $11,360 * X.

    For Tax rate = X

    Explanation:

    According to the scenario, the given data are as follows:

    Equipment purchased = $50,000

    Accumulated depreciation = $41,360

    Equipment sale value = $20,000

    So, Book value = Equipment purchased - Accumulated depreciation

    = $50,000 - $41,360

    = $8,640

    Now, Capital Gain = Sale value - Book value = $20,000 - $8,640 = $11,360

    As, there is no Tax rate is given, so assume tax rate = X

    So, The amount of tax due = Capital gain * Tax rate

    = $11,360 * X

    If tax rate = 20%

    Then Amount of tax due = $11,360 * 20% = $2,272.
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