The Alpha Beta Corporation disposes a capital asset with an original cost of $170,000 and accumulated depreciation of $109,000 for $50,000. Alpha betas tax rate is 40%. Calculate the after-tax cash inflow from the disposal of the capital asset. A. $63,000 B. $4,400 C. ($4,400) D. $54,400

Question

Walker Castaneda

Business

20 June, 17:48

The Alpha Beta Corporation disposes a capital asset with an original cost of $170,000 and accumulated depreciation of $109,000 for $50,000. Alpha betas tax rate is 40%. Calculate the after-tax cash inflow from the disposal of the capital asset. A. $63,000 B. $4,400 C. ($4,400) D. $54,400

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Leslie James · Answer 1

Option D) $54.400

Explanation:

When a company disposes a capital asset, the cost of the asset it's the remanent value, that is the difference between the original cost less the accumulated depreciation, in this case $170.000 minus $109.000, remanent value is $61.000.

This value it's the cost of sale and the price it's $50.000, the result of this transaction it's a loss of ($11.000) so the after-tax cash inflow it's ($4.400).

The total Cash Inflow it's the sum of $50.000 (gained from the sale) and the save on taxes for $4.400, because of the loss I get a payback on taxes, the total is $54.400.