Question

A company had sales last year of $3,000,000. They had operating expenses of $1,600,000. They bought a machine that cost $500,000 that has a life of 10 years and a salvage value of $15,000. Based on MACRS what was their Taxable Income?

Answer 1

The answer is $1,350000

Step-by-step explanation:

Solution

Given that:

Company sales of last year = $3,000,000

Operating expenses = $1,600,000

The purchase of machine = $500,000

Life of machine = 10 years

The salvage value = $15,000

Now,

we find the Taxable income which is given below:

Taxable income = sales - operating expenses - depreciation in year 1

Taxable income = $3,000000 - $1,600000 - 10% * $500,000

Therefore the atxable income is = $1,350000