Maxine Corporation purchased equipment for $20,400. The equipment has an estimated life of six years and...
Maxine Corporation purchased equipment for $20,400. The
equipment has an estimated life of six years and an estimated
disposal value of $2,000, but for tax purposes the salvage value
will be zero. Maxine sold for $3,000 the old equipment that had an
undepreciated cost of $2,500. Assuming a tax rate of 40-
percent, how much was the cash outlay for the new equipment?
Homework Answers
Net cash inflow from sale of assets = Sale amount - tax
= 3000 - {(3000-2500)*0.40}
= $2800
Cash outlay for the new equipment = $20400 - 2800 = $17600
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