1. A machine on January 1, 20x1 at a cost of $400,000. Assume that the machine has a useful life of five years and a salvage value of $50,000. At the end of year 20x2, after recording depreciation for the year, the company's Accumulated Depreciation account contains a balance of $140,000. What is the asset book value at the end of 20x2?
a. $210,000
b. $260,000
c. $400,000
d. $350,000
2. Assume a corporation has earnings before depreciation and taxes of $102,000, depreciation of $40,000 and that it is in a 35% tax bracket. Compute its cash flow using the following format.
earnings before depreciation and taxes
depreciation
earnings before taxes
taxes
earnings after taxes
depreciation
cash flow