Question

National Geographic is replacing an old printing press with a new one. The old press is being sold for $350,000 and it has a net book value of $75,000. Assume that National Geographic is in the 30% income tax bracket. What is the tax implication of the proceed of the sale of the old press? Round to the nearest penny. If tax liabilities, type a negative sign in front. Do not include a dollar sign in your answer. (i.e. If your answer is tax liabilites of $8,765,43, type -8765.43; if tax shield of $8,765.43, type 8765.43).

Answer 1

$82,500

Step-by-step explanation:

The computation of the tax implication on proceed on sale is shown below:

= (Sale value of old press - net book value) × income tax rate

= ($350,000 - $75,000) × 30%

= $275,000 × 30%

= $82,500

We simply deduct the net book value from the sale value of the old press and then multiply it with the income tax rate so that the correct amount can come.