Question

JT Engineering originally paid $10,000 for a machine and recorded depreciation at a rate of $1,000 per year for five years. They sold the machine in the middle of the sixth year for $6,000. What is JT’s amount of loss or gain on the sale?

Answer 1

Answer: $1,500

Step-by-step explanation:

The net book value of the machine on the sale date is $ 4,500.

This is by adding the depreciation for the half year in the sixth year of $ 500.

So the total depreciation is $ 5,500. The net book value is thus $ 4,500 (Cost $ 10,000 minus Total Depreciation $ 5,500).

The gain is Sales Price $ 6,000 minus Net Book Value $ 4,500 is $ 1,500.