Victor bought a car for $44,500 as a business investment opportunity. He is allowed to depreciate over 10 years and take it as business tax deduction. At the end of the 10th year he sells this car for $22,000. Compute the cumulative cash benefit after sale on this transaction. Assume that Victor can earn 5% after tax returns and is in 28% tax bracket. Tax rate on gain for Victor is 15%. O $15,672 O $12,372 O $12,172 O $18,472

          Victor bought a car for $44,500 as a business investment opportunity. He is allowed to depreciate over 10 years and take it as business tax deduction. At the end of the 10th year he sells this car for $22,000. Compute the cumulative cash benefit after sale on this transaction. Assume that Victor can earn 5% after tax returns and is in 28% tax bracket. Tax rate on gain for Victor is 15%.
O $15,672
O $12,372
O $12,172
O $18,472

Victor bought a car for 44,500 as a business investment opportunity. He is allowed to depreciate over 10 years and take it as business tax deduction. At the end of the 10th year he sells this car for22,000. Compute the cumulative cash benefit after sale on this transaction. Assume that Victor can earn 5% after tax returns and is in 28% tax bracket. Tax rate on gain for Victor is 15%.
O 15,672
O12,372
O 12,172
O18,472

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Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Manasvee Singh

04/13/2022

Step 1

The car was bought for $44,500 and can be depreciated over 10 years. Therefore, the annual depreciation expense is $44,500 / 10 = $4,450. Show more…

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Victor bought a car for $44,500 as a business investment opportunity. He is allowed to depreciate it over 10 years and take it as a business tax deduction. At the end of the 10th year, he sells the car for $22,000. Compute the cumulative cash benefit after the sale on this transaction. Assume that Victor can earn 5% after-tax returns and is in a 28% tax bracket. The tax rate on the gain for Victor is 15%. Options: A) $15,672 B) $12,372 C) $12,172 D) $18,472