Final answer:
The original cost of The Dorm Company's machine, which had accumulated depreciation of $45,000, a salvage value of $8,000, sold for $50,000, and resulting in a gain of $7,000, was $88,000.
Step-by-step explanation:
To determine the original cost of the machine sold by The Dorm Company, we need to consider the given information: accumulated depreciation is $45,000, salvage value is $8,000, the machine is sold for $50,000, and a gain of $7,000 is recognized.
The gain on sale is the difference between the machine's selling price and its book value (original cost minus accumulated depreciation). To find the original cost:
- Selling Price = $50,000
- Gain on Sale = $7,000
- Book Value at Sale = Selling Price - Gain on Sale
= $50,000 - $7,000
= $43,000 - Book Value at Sale = Original Cost - Accumulated Depreciation
$43,000 = Original Cost - $45,000 - Original Cost = Book Value at Sale + Accumulated Depreciation
= $43,000 + $45,000
= $88,000
Therefore, the original cost of the machine was $88,000.