Herfindahl & Company acquired machinery with a cost of $100,000. On January 1, the machine has accumulated depreciation of $60,000. If the machinery is sold on the following July 1 for $45,000 and the straight-line method has been used during the previous six years of life, how much gain or loss will be recorded on the sale? a. $3,000 loss. b. $5,000 gain. c. $10,000 gain. d. $11,000 gain. - Dinesh S
B?
B must be the answer.
I am sorry; I meant C Accumulated depreciation of $60,000 Depreciation for six months 5000 Total depreciation as on the date of sale 65000 B V = 35000 Sold for 45000 Profit 10000
Herfindahl & Company acquired machinery with a cost of $100,000. On January 1, the machine has accumulated depreciation of $60,000. If the machinery is sold on the following July 1 for $45,000 and the straight-line method has been used during the previous six years of life, how much gain or loss will be recorded on the sale? a. $3,000 loss. b. $5,000 gain. c. $10,000 gain. d. $11,000 gain. bv at on June 1 = 100000-60000-5000=35000 Sold for 45000 so 10000 gain. C
C
Accumulated Depreciation = 60,000 Deperciation for the current year is half the normal years since its from Jan - July (6 months) A normal year has 60,000/6 = 10,000 in deperciation. In this half year we will have $5000 added to the Accumulated deperciation for a total of $65000 Net Book Value = 100,000 - 65,000 = 35,000 Since we sold a 35,000 item for 45,000 we clearly make a 10,000 gain. C