Question

On January 1, 2009, Coronado Industries purchased for $690000, equipment having a useful life of ten years and an estimated salvage value of $48600. Coronado has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2017, the equipment was sold for $152500. As a result of this sale, Coronado should recognize a gain of

(A) $88360.
(B) $152500.
(C) $0.
(D) $39760

Answer 1

There is not gain in this operation so the answer is $0

Step-by-step explanation:

There are some journal entries that needs to be done to have a full picture of the statement

* Purchase

Fixed Assets 690.000

Cash 690.000

* Monthly depreciation

Since, the FA was depreciated during 8 years. Firstly you have to calculate the amount that can be depreciate on a monthly basis

Amount to be depreciated = (Cost of the FA - Salvage value) = (690.000-48.600) = 641.400

Then calculate the yearly depreciation

Yearly depreciation = ((amount to be depreciated/useful life) * years used) =

(641.400/10*8) = 513.120

then the journal entry to record the monthly depreciation for 8 years is

Depreciation expense 513.120

Acc Depreciation 513.120

* Post the Journal Entry to record the sell of FA

You have to reverse the Acc Depreciation and credit the FA

Cash 152.500

Fixed assets 690.000

Acc depreciation 513.120

Loss on sale of FA 24.380