Question

On July 1, 2018, Hale Kennels sells equipment for $216000. The equipment originally cost $602000, had an estimated 5-year life and an expected salvage value of $100000. The accumulated depreciation account had a balance of $344000 on January 1, 2018, using the straight-line method. The gain or loss on disposal is

Answer 1

$8,200 gain

Step-by-step explanation:

Annual depreciation = ($602,000 - $100,000) / 5 = $100,400

Depreciation from January 1 - July 1 (6 months) = $100,400 * (6/12) = $50,200

Total accumulated depreciation = $344,000 + $50,200 = $394,200

Net book value (NBV) of the equipment = $602,000 - 394,200 = $207,800

Loss or gain on disposal = Sales proceed - NBV = $216,000 - $207,800 = $8,200 gain