Fang Corp. acquired an asset on August 1, 2021, for $33,000 with an estimated 5-year life...

Fang Corp. acquired an asset on August 1, 2021, for $33,000 with an estimated 5-year life and $3,000 residual value. Fang uses straight-line depreciation.

Calculate the gain or loss if the asset was sold on April 30, 2023, for $25,000. (Enter a gain as a positive number and a loss as a negative number.)

Solutions

Expert Solution

Cost of asset = $33,000

Estimated useful life = 5 years

Residual value = $3,000

Annual depreciation expense = (Cost of asset- Residual value)/ Estimated useful life

= (33,000-3,000)/5

= 30,000/5

= $6,000

Depreciation expense for the year 2021 = Annual depreciation expense x 5/12

= 6,000 x 5/12

= $2,500

Depreciation expense for the year 2022 = Annual depreciation expense

= $6,000

Depreciation expense for the year 2023 = Annual depreciation expense x 4/12

= 6,000 x 4/12

= $2,000

Accumulated depreciation expense = Depreciation expense for the year 2021+ Depreciation expense for the year 2022 + Depreciation expense for the year 2023

= 2,500+6,000+2,000

= $10,500

Book value of asset at April 30, 2023 = Cost of asset- Accumulated depreciation expense

= 33,000-10,500

= $22,500

Sale price of asset = $25,000

Gain on sale of asset = Sale price of asset- Book value of asset at April 30, 2023

= 25,000-22,500

= $2,500

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

An asset was purchased on January 1, 2020 for $150,000. The estimated useful life is 5...

An asset was purchased on January 1, 2020 for $150,000. The estimated useful life is 5 years and 31,250 units. With the residual value being $25,000 prepare a schedule of depreciation for each of the Straight-line method, Double Declining Method and the Units of Production method. The units to be produced are as follows: Year 1 5,000 units, Year 2 4,000 units, Year 3 6,000 units, Year 4 10,000 units and Year 5 12,000 units. What is the depreciation expense...

On January 1, five years ago, a business acquired an asset with a 35 year estimated...

On January 1, five years ago, a business acquired an asset with a 35 year estimated useful life. On January 1 of this year, a review of estimated useful life determined that the estimated life should be 45 more years. as a result of the review, and in compliance with GAAP, A- The original cost should be amortized over the next 45 years B- the unamortized cost should be amortized over the next 40 years C- the unamortized cost should...

Equipment acquired on January 5 at a cost of $151,710, has an estimated useful life of...

Equipment acquired on January 5 at a cost of $151,710, has an estimated useful life of 16 years, has an estimated residual value of $9,950, and is depreciated by the straight-line method. a. What was the book value of the equipment at December 31 the end of the fourth year? $ b. Assuming that the equipment was sold on April 1 of the fifth year for 107,900. 1. Journalize the entry to record depreciation for the three months until the...

A plant asset with a cost of $270,000, estimated life of 5 years, and residual value...

A plant asset with a cost of $270,000, estimated life of 5 years, and residual value of $45,000, is depreciated by straight-line method. This asset is sold for $190,000 at the end of the 2nd year. a) Prepare the entry for depreciation for the year? b) Prepare the entry for the sales of the asset.

An asset cost $13,000; estimated residual value, $1,000, and estimated life: Estimated Life Actual usage In...

An asset cost $13,000; estimated residual value, $1,000, and estimated life: Estimated Life Actual usage In years 5 In running time (hours) 3,000 hrs. Year 1 = 700 hrs. Year 2 = 3200 hrs. In productive output (units) 10,000 units Year 1 = 2000 units Year 2 = 5000 units Straight Line Year Depreciation Expense Accumulated Depreciation Cost Net Book Value Yr. 1 13,000 Yr. 1 end Yr. 2 Service Hours Year Depreciation Expense Accumulated Depreciation Cost Net Book Value...

Reid acquired two assets in 2017: computer equipment (5-year property) acquired on August 6th with a...

Reid acquired two assets in 2017: computer equipment (5-year property) acquired on August 6th with a basis of $510,000 and machinery (7-year property) on November 9th with a basis of $510,000. Assume that Reid has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but not bonus expensing). 1-Section 179 expense? 2-Depreciation on computer? 3-Depreciation on machinery? 4-Total maximum depreciation expense including §179 expense?

A plant asset acquired on October 1, 2022 at a cost of $800,000 has an estimated...

A plant asset acquired on October 1, 2022 at a cost of $800,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life. Instructions Determine the depreciation expense for the first two years using the: (a) straight-line method. (b) double-declining-balance method.

Ayres Services acquired an asset for $128 million in 2021. The asset is depreciated for financial...

Ayres Services acquired an asset for $128 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income $ 360 $ 380 $ 395 $ 430...

Ayres Services acquired an asset for $176 million in 2021. The asset is depreciated for financial...

Ayres Services acquired an asset for $176 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income $390 $410 $425 $460 Depreciation on the income...

On June 1, a machine costing $660,000 with a 5-year life and an estimated $50,000 salvage...

On June 1, a machine costing $660,000 with a 5-year life and an estimated $50,000 salvage value was purchased. It was also estimated that the machine would produce 200,000 units during its life. Actual production would be 40,000 units per year for all five years. 1. Using the depreciation template provided, determine the amount of depreciation expense for the third year under each of the following assumptions: 1.The company uses the straight-line method of depreciation. 2.The company uses...

Subjects