Question

On January 1, 2020, the Accumulated Depreciation—Machinery account of Astros Company showed a balance of $370,000. At the end of 2020, after the adjusting entries were posted, it showed a balance of $395,000. During 2020, one of the machines which cost $125,000 was sold for $60,500 cash. This resulted in a loss of $4,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2020?

Answer 1

Answer)  Depreciation expense for 2020 = $85,500

Explanation

Accumulated depreciation opening balance = $370,000 (given)

Accumulated depreciation Closing balance = $395,000 (given)

Accumulated depreciation on machinery disposed(Till date) = Machinery cost - book value at the time of sale ( Sale price + loss)

= $125,000 - ($60,500 + 4000)

= $125,000 - $64,500

= $60,500

Depreciation expense for 2020 = Accumulated depreciation Closing balance - (Accumulated depreciation opening balance - Accumulated depreciation on machinery disposed)

= $395,000 - ( $370,000 - $60,500)

= $ 395,000 - 309,500

=85,500

Depreciation expense for 2020 = $85,500

For better understanding please refer to the below details.

Dr Accumulated depreciation Cr

Particulars	Amount($)	Particulars	Amount($)
Machinery Account (Accumulated dep on machinery disposed, transferred to machinery account) (calculated)	60,500	Opening balance (given in question)	370,000
		Depreciation expense (balancing figure)	85,500
Closing balance (given in question)	395,000
Total	455,500	Total	455,500