In: Accounting
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."
"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