Question

Sheffield Corp. purchased machinery for $1410000 on January 1, 2014. Straight-line depreciation has been recorded based on a $72000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $18500. How much cash did Sheffield receive from the sale of the machinery?

Answer 1

Cost of Machinery	$ 1,410,000
Less: Salvage value	$     (72,000)
Depreciable value	$ 1,338,000
Life of Machinery	5 Years
Depreciation per year ($1,338,000/5)	$     267,600

Cost of Machinery	$   1,410,000
Less: Accumulated depreciation on May 1, 2018 *	$ (1,159,600)
Book value of Machinery	$       250,400
Add: Gain on sale	$         18,500
Cash should be received on sale	$       268,900

*

Depreciation for 2014	$       267,600
Depreciation for 2015	$       267,600
Depreciation for 2016	$       267,600
Depreciation for 2017	$       267,600
Depreciation for 2018 ($267,600/12*4)	$         89,200
Accumulated depreciation on May 1, 2018	$   1,159,600

Answer is $268,900