Question

On December 31, Strike Company sold one of its batting cages for $20,084. The equipment had an initial cost of $223,162 and had accumulated depreciation of $200,846. Depreciation has been recorded up to the end of the year. What is the amount of the gain or loss on this transaction?

Answer 1

Loss on disposal = $2232

Step-by-step explanation:

To calculate the amount of gain or loss on sale, we must first calculate the net book value or NBV of the asset. The net book value is the difference between the cost of the asset and the accumulated depreciation. The formula for NBV is as follows,

NBV = Cost - Accumulated depreciation

NBV = 223162 - 200846

NBV = 22316

If the sales proceeds are more than the NBV of the asset, the asset is sold on gain and vice versa.

Loss on disposal = 20084 - 22316 = - $2232 or$2232 loss