Question

1/1/X2 Equipment's original cost $100,000

Estimated salvage value $20,000
12/31/X5 Accumulated depreciation $32,000
12/31/X5 Appraised fair market value $75,000
If the equipment was sold on 12/31/X5 for $80,000 cash, then a gain or (loss) on sale of the equipment would be recorded for

Answer 1

To calculate the gain or loss on the sale of equipment, subtract the net book value from the sale price. In this scenario, selling the equipment for $80,000 when the net book value is $68,000, results in a gain of $12,000.

Step-by-step explanation:

The student is querying about a business transaction related to the sale of equipment and its impact on financial records, specifically regarding the recognition of a gain or loss on the sale. To determine the gain or loss on the sale of equipment, one would calculate the difference between the sale price and the net book value (cost minus accumulated depreciation) of the equipment as of the sale date.

To compute this:

1. Subtract the accumulated depreciation from the equipment's original cost to find the net book value. Net book value = $100,000 - $32,000 = $68,000.
2. Then, subtract the net book value from the sale price to determine the gain or loss. Gain/Loss on sale = $80,000 (sale price) - $68,000 (net book value).

In this case, the sale of the equipment for $80,000 resulted in a gain of $12,000, as the sale price was higher than the net book value of the equipment.