Problem:
Delta Mechanical Systems purchased a material conveyor system three years ago. Now, the company is going to sell the system and acquire more advanced technology. Data relating to this equipme
|
Market value now
|
$15,000
|
|
Original cost
|
24,000
|
|
Book value now, for tax purposes
|
8,000
|
|
Book value now, for financial accounting purposes
|
15,000
|
|
Corporate tax rate
|
40%
|
a. How much depreciation has been claimed on the conveyor system for tax purposes? For financial accounting purposes?
b. What will be the after-tax cash flow from the sale of this asset?
c. What will be the after-tax cash flow from the sale of the asset if its market value is only $6,000?