Question

Bowie Company uses a calendar year and the straight line depreciation method. On December 31, 2018, after adjusting entries were posted, Bowie Company sold a machine which was originally purchased on January 1, 2015. The historical cost was $23,000, the salvage value assumed was $1,000 and the original estimated life was five years.. It was sold for $4,400 cash. Using this information, how much should be recorded on December 31 for the Gain or (Loss)? Round to whole dollars.

Answer 1

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Bowie Company	Amount $	Note
Answer 1
Cost of equipment	23,000.00	A
Less: Salvage value	1,000.00	B
Depreciable value	22,000.00	C=A-B
Life (Years(	5.00	D
Annual Depreciation Expense	4,400.00	E=C/D
Accumulated Depreciation at the date of sale
Depreciation Expense for 2015	4,400.00	See E
Depreciation Expense for 2016	4,400.00
Depreciation Expense for 2017	4,400.00
Depreciation Expense for 2018	4,400.00
Accumulated Depreciation at the date of sale	17,600.00	F
Cost of equipment	23,000.00	See A
Less: Accumulated Depreciation at the date of exchange	17,600.00	See F
Book Value at the date of sales	5,400.00	G=A-F
Sale value	4,400.00	H
Loss on sale	1,000.00	I=G-H