What is the impact on taxes from the sale of the machine

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Reference no: EM131330307

Bill Sharpe, owner of Sharper Knives, Inc is closing his business at the end of the current fiscal year. His sole asset, the knife-sharpening machine, is four years old. A depreciation table for the asset is shown below. Bill has agreed to sell the machine at the end of the year for $100,000. What is the impact on taxes from the sale of the machine? (Assume that Sharper Knives claimed a regular depreciation expense in the calculation of income taxes.) The tax rate is 35%. Round your answers to the nearest dollar.

Depreciation Table for Knife Sharpener

Year Basis Rate Depr Expense Acc Depr

1 $250000 14.29% 35,725 35,725

2 250000 24.49% 61,225 96,950

3 250000 17.49% 43,725 140,675

4 250000 12.49% 31,225 171,900

5 250000 8.93% 22,325 194,225

$25,165 additional taxes owing to IRS, $25,165 tax refund from IRS, $7,665 additional taxes owing to IRS, $27,335 additional taxes owing to IRS, $7,665 tax refund from IRS

Reference no: EM131330307

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