Question

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

Answer 1

A loss on sale of $5,000

Step-by-step explanation:

Calculation to determine what the company should record at the time of sales

First step is to calculate the Book value as on date of sale using this formula

Book value as on date of sale=Cost-Accumulated depreciation

Let plug in the formula

Book value as on date of sale=87,000-40,000

Book value as on date of sale=$47,000

Based on the above calculation the sale proceeds is lower than the book value as on date of sale which indicate a loss

Hence:

Loss =($47,000-$42,000)

Loss=$5000

Therefore At the time of sale, the company should record: A loss on sale of $5,000.