Question

On July 1, 2014, Dillman Kennels sells equipment for $66,000. The equipment originally cost $180,000, had an estimated 5-year life and an expected salvage value of $30,000. The Accumulated Depreciation account had a balance of $105,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is a. $9,000 gain. b. $6,000 loss. c. $9,000 loss. d. $6,000 gain. A company sells a plant asset that originally cost $225,000 for $75,000 on December 31, 2014. The accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $22,500 had been recorded. The company should recognize a a. $150,000 loss on disposal. $60,000 gain on disposal c. $60,000 loss on disposal $37,500 loss on disposal ()()

Answer 1

The gain or loss on disposal of an asset can be calculated by comparing the amount received from selling the asset to its book value. In the first case, there is a $12,000 gain on disposal. In the second case, there is a $37,500 loss on disposal.

Step-by-step explanation:

To calculate the gain or loss on disposal of an asset, you need to compare the amount received from selling the asset to its book value. In both cases mentioned:

1. For the first case, the equipment was sold for $66,000, while its book value was $54,000 ([$180,000 - $105,000] - [$30,000 x (2014-2010)/5]). Therefore, there is a $12,000 gain on disposal.
2. For the second case, the plant asset was sold for $75,000, while its book value was $112,500 ([$225,000 - $90,000] - [$22,500 x (2014-2014)/5]). Therefore, there is a $37,500 loss on disposal.

Therefore, the answer to the first question is d) $12,000 gain and the answer to the second question is c) $37,500 loss.

Answer 2

(D) $6,000 gain; (C) $60,000 loss on disposal

Step-by-step explanation:

In the first question,

Original cost = $180,000

Estimated useful life = 5 years

Expected salvage value = $30,000

Therefore, annual deprecation = (180,000-30,000)/5 = 150,000/5 = $30,000.

With an accumulated depreciation of $105,000 on January 1, 2014 and a sale of the equipment on July 1, 2014, we need to add to the accumulated depreciation the depreciation for the six month period from January 1 to July 1 to determine the accumulated depreciation up to the point of sale.

6 month depreciation = 1 year depreciation/2 = 30,000/2 = 15,000

Therefore, accumulated depreciation up to the point of sale = 105,000 + 15,000 = 120,000.

Therefore, net book value (NBV) at time of sale = original cost - accumulated depreciation

= 180,000 - 120,000 = 60,000.

Thus, given a sale value of 66,000, there gain/(loss) on sale = sale value - NBV = 66,000 - 60,000 = 6,000 gain.

In the Second Question,

Original cost = $225,000

Sale value = $75,000

Accumulated depreciation = $90,000 (up to the point of sale).

Therefore, NBV at the point of sale = original cost - accumulated depreciation = 225,000 - 90,000 = 135,000.

Thus, profit/(loss) on disposal = sale value - NBV = 75,000 - 135,000 = -60,000 = 60,000 loss on disposal.