Question

In: Accounting

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.)

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 2 years ago

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