On October 1, 2019, Sobriety Company purchased a building for $2,000,000 to open a bar there,...

On October 1, 2019, Sobriety Company purchased a building for $2,000,000 to open a bar there, expecting to use it for fifteen years. Sobriety uses straight-line method to depreciate the building and estimates its residual value at $650,000. On August 1, 2022, Sobriety sold the building for $1,800,000. What is the gain or loss from the disposal? Identify whether it is gain or loss, and the amount. For example, the answer is $100,000 gain, then write down "$100,000 gain."

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Expert Solution

"55000 Gain"

Workings were as follows:

Particulars	Remarks
Cost Of Building	2,000,000
Salvage Value	650,000
Depreciation Base (Cost - Salavage)	1,350,000
Useful Life	15
Yearly Deprciation	90,000

90000 = Yearly Depreciation

Net Book Value on 1st august 2022 = Cost - Total Depreciation =2000000 - 255000 = 1745000

Sold Value = 1800000

The Building sold with higher than Net Book Value .So it booked gain on sales of fixed asset

Gain = Sold Value - Net Book Value on August 2022 = 1800000 - 1745000 = 55000

Booked 55000 gain

ekkarill92 answered 1 year ago

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