Question

On Dec 31, Strike Company sold one of its batting cages for 55,000. The equipment had an initial cost of 310,000 and has accumulated depreciation of 260,000. Depreciation has been taken up the end of the year. What is the amount of the gain or loss on this transaction?

Answer 1

To calculate the gain or loss, subtract the accumulated depreciation from the initial cost to find the net book value. Compare the net book value to the amount received from the sale to determine the gain or loss. Therefore the correct answer is $5,000.

Step-by-step explanation:

To calculate the gain or loss on the transaction, we need to find the net book value and compare it to the amount received from the sale. The net book value is calculated by subtracting the accumulated depreciation from the initial cost of the equipment. In this case, the net book value is $310,000 - $260,000 = $50,000. Since the equipment was sold for $55,000, there is a gain of $55,000 - $50,000 = $5,000.