Question
In: Accounting
Ouyang Inc. sold a piece of machinery for $350,000 on Dec 31, 2013 and reported the...
Ouyang Inc. sold a piece of machinery for $350,000 on Dec 31, 2013 and reported the following information related to the machinery with a straight-line depreciation method used.
Acquisition cost: $500,000
Acquisition date: 1 Jan, 2013
Residual value: 100,000
Years of useful life: 4
The result of the sale is most likely:
| a loss of $25,000 |
| a loss of $50,000 |
| a loss of $150,000 |
| a gain of $50,000 |
| a gain of $250,000 |
Solutions
Expert Solution
| Cost of Acquisition | $ 500,000.00 | |
| Residual Value | $ 100,000.00 | |
| Useful life | 4 years | |
| Sale value | $ 350,000.00 | |
| Under straight line method , Depreciation = ( Cost of acquisition - Residual value ) / Useful life | ||
| (500000-100000)/4 | ||
| $ 100,000.00 | ||
| Therefore, Machinery as on 31/12/2013 | 500,000-100,000 = 4,00,000 | |
| Sale value | $ 350,000.00 | |
| Loss | $ (50,000.00) | |
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