Question

Bogle Company purchased machinery for $320,000 on January 1, 2010. Straight-line depreciation has been recorded based on a $20,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2014 at a gain of $6,000. How much cash did Bogle receive from the sale of the machinery?

A. $46,000.
B. $86,000.
C. $54,000.
D. $66,000.

Answer 1

Bogle Company received $26,000 cash from the sale of the machinery.

Step-by-step explanation:

The cash Bogle Company received from the sale of the machinery can be calculated by subtracting the gain from the proceeds of the sale. The gain is given as $6,000. To find the proceeds, we need to calculate the initial cost of the machinery minus the depreciation over the years until the sale.

The depreciation per year is calculated by dividing the difference between the initial cost and the salvage value by the useful life of the machinery. In this case, the depreciation per year is ($320,000 - $20,000) / 5 = $60,000. From 2010 to 2014, there are 5 years, so the total depreciation is $60,000 x 5 = $300,000. The proceeds can be calculated by subtracting the depreciation from the initial cost: $320,000 - $300,000 = $20,000. Finally, to find the cash received, we add the gain to the proceeds: $6,000 + $20,000 = $26,000.