Frank operates a construction business in Dallas, Texas. On May 1, 2014, Frank p

Question

Frank operates a construction business in Dallas, Texas. On May 1, 2014, Frank purchased a warehouse for his business. The warehouse cost $500,000. In June 2014, Frank purchased some new equipment for the business. The equipment cost $200,000. Frank took $8,000 of depreciation on the warehouse in 2014 and $16,000 in 2015. Frank took $40,000 of depreciation on the equipment in 2014 and $80,000 in 2015. Frank decided to sell the warehouse and equipment so he could upgrade the business. He sold the warehouse for $550,000 and the equipment for $220,000 on December 31, 2015. What result to Frank?

Explanation / Answer

Total Profit (loss) to Frank = Profit (loss) on sale of warehouse + Profit (loss) on sale of Equipment Result to Frank = ($74,000 + $1,40,000) = $2,14,000 Calculation of Profit (loss) on sale of Equipment and Warehouse: Warehouse Equipment (a) Sale Value $5,50,000 $2,20,000 Cost $5,00,000 $2,00,000 Less: Depreciation 2014 $8,000 $40,000 Less: Depreciation 2015 $16,000 $80,000 (b) Book Value $4,76,000 $80,000 (a) - (b) Profit (loss) on sale $ 74,000 $ 1,40,000 Total Profit to Frank ($74,000 + $1,40,000) $ 2,14,000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.