Question

Granite Stone Creamery sold ice cream equipment for $10,000. Granite Stone originally purchased the equipment for $74,000, and depreciation through the date of sale totaled $62,500. Determine the financial statement effects of the gain or loss on the sale of the equipment. (Amounts to be deducted should be entered with a minus sign.)

a. Gain of $35,500

b. Gain of $23,500

c. Loss of $35,500

d. Loss of $23,500

Answer 1

The financial statement effect of the gain or loss on the sale of the equipment is a loss of $1,500 as the book value at the time of sale was $11,500 and it sold for $10,000. So, none of the option is correct.

Step-by-step explanation:

In order to assess the financial impact of the gain or loss from the equipment sale on the financial statements, a comparison is made between the equipment's book value and its selling price.

The book value, calculated as the original cost minus accumulated depreciation, stands at $11,500 in this instance ($74,000 - $62,500).

The determination of a gain or loss depends on whether the selling price exceeds or falls short of the book value.

In this specific case, the selling price is $10,000, which is less than the book value of $11,500.

Consequently, the financial statement effect manifests as a loss amounting to $1,500.

This analytical approach provides a systematic method for the financial outcomes of equipment sales, aiding in the accurate representation of gains or losses in the organization's financial statements.

Therefore, none of the option is correct, as there is a loss of $1,500.