1. Eiland Corporation is selling an existing asset for $21,000. The asset, when purchased, cost $10,000, was being depreciated under MACRS using a five?year recovery period and has been depreciated for four full years. If the assumed tax rate is 40 percent on ordinary income and capital gains, what the tax effect of this transaction (The 5-year MACRS depreciation rates are 20%, 32%, 19%, 12%, 12%, and 5%.)
2. Industrial Products Inc. is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are expected to change. Management expects cash to increase by $20,000, accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable will increase by $50,000, accruals by $10,000 and long term debt by $100,000. What is the change in net working capital?