Question

In the current year, Brogan Company sold equipment for $20,000. The original cost was $80,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. The equipment was fully depreciated. How much is the gain or loss on the sale?

Answer 1

The gain on the sale of Brogan Company's fully depreciated equipment is calculated to be $12,000, as the sale price $20,000 exceeded the equipment's book value of $8,000.

Step-by-step explanation:

The student is asking about how to calculate the gain or loss on the sale of a fully depreciated asset. To determine the gain or loss, we compare the sale price of the equipment to its book value at the time of sale. Since the equipment was fully depreciated, its book value would be its original cost minus total depreciation, which in this case is the salvage value of $8,000 (because it was fully depreciated).

Gain or loss on the sale of the equipment = Sale price - Book value of the equipment.

The sale price is stated to be $20,000, and the book value, as mentioned, would be the salvage value of $8,000.

Gain or loss = $20,000 (sale price) - $8,000 (book value) = $12,000.

Therefore, Brogan Company realized a gain of $12,000 on the sale of the equipment.