Questions
COMM_V 370 101-108 2025W1 COMM 370-Practice Midterm-2025-W1
Multiple dropdown selections
Concerning salvage value when assets are sold, letting: P = purchase price S: salvage value B: residual book value, When S < P: A. If S = B No tax adjustments are required. B. If S > B There is recaptured depreciation. C. If S < B There is a terminal loss.
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Step-by-Step Analysis
We start by restating the given scenario and the three proposed statements.
- Scenario: When selling an asset, with P = purchase price, S = salvage value, and B = residual book value, and given that S < P.
- Option A (No tax adjustments are required if S = B): This statement claims that when the salvage value equals the book value, there are no tax adjustments upon sale. In many tax frameworks, if the sale price equals the tax basis (i.e., S = B) there is no gain or loss to the tax authorities, so no depreciation recapture or terminal loss arises. Therefore, this option describes a situat......Login to view full explanationLog in for full answers
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