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 Crosson Corporation recently sold a used machine for $40,000

Accounting

 Crosson Corporation recently sold a used machine for $40,000. The machine had a book value of $60,000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 20 percent?

  1. $40,000
  2. $60,000
  3. $44,000
  4. $32,000

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Answer:

C . $ 44,000

Step-by-Step explanation

Loss = Book value - Sold price

= $60,000 - $40,000

= $20,000

Tax saving from loss = 20% of $20,000 loss

= $4,000

After-tax cash flow = Proceeds + Tax saving from loss

= $40,000 + $4,000

= $44,000