Using the straight line method to salvage value

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Reference no: EM131045675

Capital Foods purchased an oven 5 years ago for $45,000. The oven is being depreciated over its estimated 10 year life using the straight line method to a salvage value of $5,000. Capital is planning to replace the oven with a more automated one that will cost $150,000 installed. If the old oven can be sold for $30,000, what is the tax liability? Assume a marginal tax rate of 40 percent.

a. $ 900

b. $ 2,000

c. $127,000

d. $254,600

Reference no: EM131045675

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