Question

Marigold Corp. purchased machinery for $1260000 on January 1, 2017. Straight-line depreciation has been recorded based on a $84000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2021 at a gain of $26500. How much cash did Marigold receive from the sale of the machinery

Answer 1

Answer: $267,300‬

Step-by-step explanation:

The cash received will be:

= Net book value + gain

Net book value:

Annual depreciation = (1,260,000 - 84,000) / 5 years

= $‭235,200‬ per year.

Depreciation up until January 1, 2021 = ‭235,200‬ * 4

= $‭940,800‬

Depreciation up until May 1, 2021 = 940,800 + ( (235,200 / 12 months) * 4 months )

= ‭$1,019,200‬

Net book value = 1,260,000 - ‭1,019,200‬

= $‭240,800‬

Cash received = ‭240,800‬ + 26,500

= $267,300‬