Smith Manufacturing is considering the sale of two non depreciable assets, A and B. Asset A was purchased for $2000 and will be sold today for $2250. Asset B was purchased for $30,000 and will be sold today for $35000. The firm is subject to a 40% tax rate on capital gains.
1. Calculate the amount of capital gain realized on each of the assets.
Answer: I got $250 for A and $3000 for B
2. Calculate the tax on the sale of each asset.
Answer: Need help please...thanks!
I can see the $250 but not the $3000? I see $5,000? Now take 40% of each total for the tax on each one.
Sra
To calculate the tax on the sale of each asset, you first need to determine the capital gain realized on each asset.
Capital gain is calculated by subtracting the purchase price from the sale price of an asset.
For Asset A:
Capital gain = Sale price - Purchase price
Capital gain = $2250 - $2000
Capital gain = $250
For Asset B:
Capital gain = Sale price - Purchase price
Capital gain = $35000 - $30000
Capital gain = $5000
Now that we have the capital gains for each asset, we need to calculate the tax on each gain.
The firm is subject to a 40% tax rate on capital gains, so we multiply each capital gain by 40% (or 0.4) to determine the tax amount.
For Asset A:
Tax on capital gain = Capital gain * Tax rate
Tax on capital gain = $250 * 0.4
Tax on capital gain = $100
For Asset B:
Tax on capital gain = Capital gain * Tax rate
Tax on capital gain = $5000 * 0.4
Tax on capital gain = $2000
Therefore, the tax on the sale of Asset A would be $100, and the tax on the sale of Asset B would be $2000.