Question

A company purchases an industrial laser for $150,000. The device has a useful life of ten years and a salvage value (market value) at the end of those ten years of $20,000. The before-tax cash flow is estimated to be $80,000 per year. You, of course, suggested applying the Seven-year MACRS (GDS) method instead of the straight-line method. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $60,000 in year four what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year

Answer 1

$13,140

Step-by-step explanation:

MACRS-7

Opening BV Dep. Rate Depreciation Closing BV

Year A B C=150000*B D=A-C

1 150,000 14.29% 21,435 128,565

2 128,565 24.49% 36,735 91,830

3 91,830 17.49% 26,235 65,595

4 65,595 12.49% 18,735 46,860

Gain on sale = Salvage value - Book value

Gain on sale = $60,000 - $46,860

Gain on sale = $13,140