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Problem:

Corporation H is preparing a cash flow statement for a new product. It purchased a metal milling machine that cost $500,000 including installation costs. It fits in the 7-year classification for MACRS depreciation. The market for the new product will be totally saturated after 5 years and production shut down. The milling machine will be sold as a used machine. The market value at the end of 5 years is expected to be $200,000

Required:

Question 1: Calculate the book value for the machine after 5 years.

Question 2: Calculate the capital gains or loss of the machine if it is sold after 5 years.

Question 3: Calculate the cash flow entry for the selling of the machine after 5 years. Assume that corporate tax rate is .4

Note: Please show guided help with steps and answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167840

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