A company bought a machine on 1 October year 1 for $52,000. The machine had an e

Question

A company bought a machine on 1 October year 1 for $52,000. The machine had an expected life of eight years and an estimated residual value of $4,000. On 31 March year 6, the machine was sold for $35,000. The company’s yearend is 31 December. The company uses the straight-line method for depreciation and it charges a full year’s depreciation in the year of purchase and none in the year of sale. What is the profit or loss on disposal of the machine? A. Loss $13,000 B. Profit $7,000 C. Profit $10,000 D. Profit $13,000

Explanation / Answer

Ans) Assets Value = $                   52,000 Residual Value = $                   (4,000) $                   48,000 Depreciatio for year = $                     6,000 Depreciation up to 5th year = $                   30,000 As depreciation has not chagrded in sales period 6year = Book value of the assets = (Book value- Depreciation ) $52,000-$30,000 $                   22,000 Sale value of the machine = $                   35,000 Profit = $35,000-$22,000 Profit = $                   13,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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