C. Cost of goods sold is increased(recorded) as sales are d. recorded nventory s

Question

C. Cost of goods sold is increased(recorded) as sales are d. recorded nventory shrinkage loss can be detected, if any, when physical counts on inventory are conducted. 8. Jiro Industries uses straight-line depreciation for all of its depreciable assets. Jiro Industries use sold a d piece of machinery on December 31, 2015, that it purchased on January 1,2014, for $10,000. Th e asset had a five-year life, zero residual value, and $2.000 accumulated depreciation as of December 31, 2014. If the sales price of the used machine was $6,500, the resulting gain or loss upon the sale was which of the following amounts? a. b. C. d. Loss of $500 Gain of $500 Loss of $1,500 Gain of $1,500

Explanation / Answer

Answer:b. Gain of $500

Depreciation per year = 10000 / 5 = 2000

Depreciation for 2014 and 2015 = 2000 + 2000 = 4000

Book value as at 31.12.2015 = 10000 - 4000 = 6000

Sale value = 6500

Gain on sale = 6500 - 6000 = 500

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