##### Calculate gain or loss on disposal.

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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.

Oct 5th, 2015

Cost of the asset = \$17,324

Depreciation for 1st year = Cost of the asset  X  (Rate/100)

= 17,324   X   (14.29/100)

= 2,475.60

Depreciation for 2nd year = Cost of the asset  X  (Rate/100)

= 17,324   X   (24.49/100)

= 4,242.65

Depreciation for 3rd year = Cost of the asset  X  (Rate/100)

= 17,324   X   (17.49/100)

= 3,029.97

Depreciation for 4th year = Cost of the asset  X  (Rate/100)

= 17,324   X   (12.49/100)

= 2,163.76

Depreciation for 5th year = Cost of the asset  X  (Rate/100)

= 17,324   X   (8.93/100)

= 1,547.03

Depreciation for 6th year = Cost of the asset  X  (Rate/100)

= 17,324   X   (8.93/100)

= 1,547.03

Therefore total depreciation for all 6 years = 2,475.60 + 4,242.65 +3,029.97 +2,163. 76 +1,547.03 +1,547.03

= 15,006.04

Book value of the asset  at the end of 6th year =  Cost of the asset  - Total depreciation

= 17,324  -  15,006.04

=  2,317.96

Profit or loss on sale of the asset               =  Book value - Sales value

= 2,317.96  -  3,996

Profit            =  \$1,678.04     (being sales is more than the book value)

Oct 5th, 2015

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Oct 5th, 2015
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Oct 5th, 2015
Sep 26th, 2017
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