Gains or Losses

Consider a five year MACRS asset purchased at $60,000. (Note that a five year MACRS property class is depreciated over six years, due to the half year convention.

TABLE P9.36

Manufacturing expenses (including depreciation)$450,000Operating expenses (excluding interest expenses)120,000A new short term loan from a bank50,000Interest expenses on borrowed funds (old and new)40,000Dividends paid to common stockholders80,000Old equipment sold60,000

The applicable salvage values would be $20,000 in year 3, $10,000 in year 5, and $5,000 in year 6.) Compute the gain or loss amounts when the asset is disposed of

(a) In year 3.

(b) In year 5.

(c) In year 6.