calculating the gain or loss on disposal

Business & Finance
Tutor: None Selected Time limit: 1 Day

Genetic Insights Co. purchases an asset for $17,324. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $3,996. Calculate gain or loss on disposal. 

Gain should be entered as positive number and loss should be entered as negative. 

Oct 3rd, 2015

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Cost of asset                                                                               =$17,324

Rate of deprecation for year 1                                                     =14.29%

Deprecation for year (17,324*14.29%)                                        =$2475.60

Carrying value at end of year 1(17324-2475.60)                         =$14848.4

Similarly, we can find the deprecation and carrying value up to year 6

Carrying value of year 2 is {14848.4*(100-24.49)%}                   =$11,212.02

Carrying value of year 3 is {11212.02*(100-17.49)%}                  =$9251.04

Carrying value of year 4 is {9251.04*(100-12.49)%}                    =$8095.58

Carrying value of year 5 is {8095.58*(100-8.93)%}                      =$7372.64

Carrying value of year 6 is {7372.64*(100-8.93)%}                      =$6714.26

Selling price at end of year 6 is                                                     =$3,996

Loss on Sale of asset(3996-6714.26)                                           =-2718.26                      


Please let me know if you need any clarification. I'm always happy to answer your questions.
Oct 3rd, 2015

Thank you!

Oct 3rd, 2015

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