Question
In: Accounting
On July 1, 2016, Crane Company sells machinery for $210500. The machinery originally cost $585000, had...
On July 1, 2016, Crane Company sells machinery for $210500. The machinery originally cost $585000, had an estimated 5-year life and an expected salvage value of $60000. The Accumulated Depreciation account had a balance of $367500 on January 1, 2016, using the straight-line method. The gain or loss on disposal is
$45500 gain.
$97000 gain.
$22750 loss.
$97000 loss.
Solutions
Expert Solution
| Answer: $45500 gain |
Step 1 : Calculation of depreciation per year:
|
Formula Straight line method = Cost - salvage value / useful life |
$585000 - $60000 / 5 = $105000
Step 2: Calculation of book value as on July 1, 2016:
Accumulated depreciation = $367500 + $105000 * 6/12 (from jan 1 to June 30)
= $420000
Book value as on July 1, 2016 = Cost - accumulated depreciation
= $585000 - $420000 = $165000
Step 3: Calculation of gain or loss:
Gain on sale = Sale price - book value
| Gain on sale = $210500 - $165000 = $45500 |
All the best...
ekkarill92 answered 1 year agoRelated Solutions
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