Question

Lawler Clothing sold manufacturing equipment for $29,000. Lawler originally purchased the equipment for $93,000, and depreciation through the date of sale totaled $77,500. What was the gain or loss on the sale of the equipment

Answer 1

Gain on disposal = $13500

Step-by-step explanation:

The gain or loss on disposal/sale of a fixed asset can be calculated by deducting the Net book value of the asset from the sales proceeds. If the NBV is more than the sales proceeds, then there is a loss on disposal and vice versa.

The net book value or NBV of an asset can be calculated as follows,

NBV = Cost - Accumulated depreciation

NBV = 93000 - 77500

NBV = $15500

Gain/(Loss) on disposal = Sales Proceeds - NBV

Gain/(Loss) on disposal = 29000 - 15500

Gain/(Loss) on disposal = $13500 gain on disposal