Question

Phantom Corporation purchased equipment for $50,000, four years ago. The accumulated depreciation to date is $41,360. If they were able to sell the equipment today for $20,000, what would be the amount of tax due

Answer 1

The correct answer is $11,360 × X.

For Tax rate = X

Step-by-step explanation:

According to the scenario, the given data are as follows:

Equipment purchased = $50,000

Accumulated depreciation = $41,360

Equipment sale value = $20,000

So, Book value = Equipment purchased - Accumulated depreciation

= $50,000 - $41,360

= $8,640

Now, Capital Gain = Sale value - Book value = $20,000 - $8,640 = $11,360

As, there is no Tax rate is given, so assume tax rate = X

So, The amount of tax due = Capital gain × Tax rate

= $11,360 × X

If tax rate = 20%

Then Amount of tax due = $11,360 × 20% = $2,272.