Question

Adelphi Company purchased a machine on January 1, 2017, for $90,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $30,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.

Answer 1

Cost of machine = 90,000

Estimated useful life = 10

Double declining depreciation rate = 2 x 1/Useful life

= 2 x 1/10

= 20%

Year	Beginning Value	Depreciation expense (Beginning Value x Depreciation rate)	Accumulated depreciation	Ending Value
2017	90,000	18,000	18000	72,000
2018	72,000	14,400	32,400	57,600
2019	57,600	11,520	43,920	46,080
2020	46,080	9,216	53,136	36,864

Book value of machine at January 1, 2021 = $36,864

Sale price of machinery = $30,000

Loss on sale of machine = Sale price of machinery -Book value of machine at January 1, 2021

= 30,000-36,864

= -$6,864

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