Question

amanda company purchased a computer that cost $10,900. it had an estimated useful life of five years and a residual value of $1,450. the computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,410 cash. how much of a gain or loss should amanda record?

Answer 1

Amanda's company should record a gain of $180 from the sale of the computer after three years, given that the sale price exceeded the book value at the time of sale.

Step-by-step explanation:

The question concerns the calculation of gain or loss from the sale of an asset using the straight-line depreciation method. First, we must calculate the annual depreciation by subtracting the residual value from the cost and then dividing by the useful life of the asset.

This gives us an annual depreciation of $(10,900 - 1,450) / 5 = $1,890 per year. After three years the accumulated depreciation will be $5,670. The book value of the asset at the time of sale is the original cost minus the accumulated depreciation, which is $5,230 ($10,900 - $5,670). Since the computer was sold for $5,410, the company recognized a gain of $180 ($5,410 - $5,230).