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10 November, 15:23

On January 1, 2012, Mill Corporation purchased for $760,000, equipment having a useful life of ten years and an estimated salvage value of $40,000. Mill has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2020, the equipment was sold for $140,000. As a result of this sale, Mill should recognize a gain of A. $ - 0 - B. $68,000. C. $28,000. D. $140,000.

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  1. 10 November, 16:12
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    Selling gain = $68,000

    Explanation:

    Giving the following information:

    Purchasing price = $760,000

    Useful life = 10 years

    Salvage value of $40,000.

    On December 31, 2020, the equipment was sold for $140,000.

    First, we need to calculate the accumulated depreciation.

    Annual depreciation = (original cost - salvage value) / estimated life (years)

    Annual depreciation = (760,000 - 40,000) / 10

    Annual depreciation = 72,000

    Accumulated depreciation = 72,000*9 = $648,000

    To calculate the gain or loss, we need to compare the book value with the selling price:

    Book value = 720,000 - 648,000 = 72,000

    Selling price = 140,000

    Selling gain = $68,000
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