1- Compute the initial purchase price for an asset with book value of $34,800 and total accumulated depreciation of $85,200.
2- A mixer was purchased two years ago for $120,000 and can be sold for $125,000 today. The mixer has been depreciated by 52% from the initial cost and the firm pays 40 percent taxes on both ordinary income and capital gain.
(a) Compute book value & capital gain (loss), if any.
(b) Find the firm’s tax liability.
Sample Solution