Problem:
Corporation H is preparing a cash flow statement for a new product. It purchased a metal milling machine that cost $500,000 including installation costs. It fits in the 7-year classification for MACRS depreciation. The market for the new product will be totally saturated after 5 years and production shut down. The milling machine will be sold as a used machine. The market value at the end of 5 years is expected to be $200,000
Required:
Question 1: Calculate the book value for the machine after 5 years.
Question 2: Calculate the capital gains or loss of the machine if it is sold after 5 years.
Question 3: Calculate the cash flow entry for the selling of the machine after 5 years. Assume that corporate tax rate is .4
Note: Please show guided help with steps and answer.