Question

On July 1, 2022, Blossom Company sells equipment for $119000. The equipment originally cost $330000, had an estimated 5-year life and an expected salvage value of $50000. The Accumulated Depreciation account had a balance of $196000 on January 1, 2022, using the straight-line method. The gain or loss on disposal is

Answer 1

Gain= $13,000

Step-by-step explanation:

Giving the following information:

Selling price= $119,000.

The equipment originally cost $330000, had an estimated 5-year life, and an expected salvage value of $50000.

The Accumulated Depreciation account had a balance of $196000.

First, we need to calculate the accumulated depreciation on July 1, 2022.

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (330,000 - 50,000)/5= $56,000

Depreciation for 2022= (56,000/12)*6= 28,000

Accumulated depreciation= 196,000 + 28,000= $224,000

The gain or loss is determined using the book value:

Book value= 330,000 - 224,000= 106,000

Gain/loss= selling price - book value

Gain/loss= 119,000 - 106,000

Gain= $13,000