Steelcase Inc. has a robotic welder that cost $89,500. Shippingand site preparation cost $2000 and installation cost $700. At theend of the 4 th year of service, this robotic welder was traded infor a new robotic welder with a purchase price of $95,900, shippingand site preparation cost $2,300 and installation cost $800. Thetrade- in allowance for the old robotic welder was $32,000 forpurchasing the new robotic welder.This equipment is a 7-year MACRSclass.
a)What is the cost basis of the new robotic welder for computingthe amount of depreciation for income tax purposes?
b)If instead of trading in the old robotic welder, SteelcaseInc. sold the old robotic welder on the open market for $32,000,then:
i) What is the cost basis of the newrobotic welder?
ii) For the sold old robotic welder, will Steelcase Inc. need topay a gains tax or get a tax benefit and calculate the value(assume 21% tax rate).
