Louwers Corporation recently sold a used machine for $50,000

Accounting Mar 13, 2021

Louwers Corporation recently sold a used machine for $50,000. The machine had a book value of $75,000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 25 percent?

$43,750
$50,000
$56,250
$75,000

Expert Solution

Answer:

C . $ 56,250

Step-by-Step explanation

Loss = Book value - Sold price

= $75,000 - $50,000

= $25,000

Tax saving from loss = 25% of $25,000 loss

= $6,250

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

= $50,000 + $6,250

= $56,250

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