On 1/1, a company buys equipment with a cost of $30300, an estimated salvage val

ID: 2466765 • Letter: O

Question

On 1/1, a company buys equipment with a cost of $30300, an estimated salvage value of $1300, and an estimated useful life of 10 years. After 5 years, the equipment is sold for $15650. What is the gain or loss on the sale if the company uses the straight line method of depreciation?
On 1/1, a company buys equipment with a cost of $30300, an estimated salvage value of $1300, and an estimated useful life of 10 years. After 5 years, the equipment is sold for $15650. What is the gain or loss on the sale if the company uses the straight line method of depreciation?

Explanation / Answer

Solution:

Cost of machine = $ 30,300

Salvage value = $ 1,300

Depreciable base = $ 29,000

Depreciation per year = $ 29,000 / 10 years

Depreciation per year = $ 2,900

Depreciation for 5 years = $ 2,900 * 5 = $ 14,500

Book value of machine after 5 years = Depreciable base - Depreciation for 5 years

Book value of machine after 5 years = $ 29,000 - $ 14,500

Book value of machine after 5 years = $ 14,500

Sale price of machine = $ 15,650

Less: Book value of machine = $ 14,500

Gain on sale of machine = $ 1,150

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On 1/1, a company buys equipment with a cost of $30300, an estimated salvage val

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