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What will be after-tax cash flow from sale of this asset

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Question - Tax effects of asset sale Three years ago, Girston Gravel pit purchased a material conveyor system. The company has decided to sell the system and acquire more advanced technology. Data relating to the existing system follow.

Current fair value $37,000

Original cost $99,000

Current book value for tax purposes $18,000

Current book value for financial accounting purposes $35,000

Corporate tax rate 30%

Required -

1. How much depreciation has been taken on the conveyor system for (1) tax and (2) financial accounting purposes?

2. What will be the after-tax cash flow from the sale of this asset?

3. What will be the after-tax cash flow from the sale of the asset if its fair value is $9,000 rather than $37,000?

Reference no: EM133102954

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