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4 January, 03:54

Career Services, Incorporated sold some office equipment for $52,000 on December 31, 2021. The journal entry to record the sale would include a gain or a loss of how much if the original cost of the equipment was $80,000 with a residual value of $5,000 and a useful life of 10 years

Assume the machine was purchased onJanuary 1,2009 and depreciated using the straight-line method.

A. Gain of $2,000.

B. Loss of $9,500

C. Gain of $9,500

D. Loss of $2,000

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Answers (1)
  1. 4 January, 04:34
    0
    Date of selling machine is 31 Dec 2021, then gain of $47,000

    If date of selling this machine is 31 Dec 2012 (used tenor: 4 years), then gain of 2,000

    Explanation:

    Depreciation per year = (original cost $80,000 - residual value $5,000) / useful life of 10 years

    = $7,500 per year

    Date of purchase: January 1, 2009

    Date of sold: December 31, 2021

    ⇒ Actual life of this machine = 13 years, but the maximum depreciation as accounting rule is for 10 year only

    After 13 years, the book value = original cost - depreciation booked

    = $80,000 - $7,500*10 = $5,000

    Gain / Loss = sold price - boo value = $52,000 - $5,000 = $47,000

    If date of selling this machine is 31 Dec 2012 (used tenor: 4 years), then we have:

    Gain / Loss = sold price - book value

    = $52,000 - ($80,000 - $7,500*4) = 2,000
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