Question

) on december 31st, gil company has decided to sell one of its machines. the initial cost of the equipment was $225,000 with an accumulated depreciation of $170,000. depreciation has been taken up to the end of the year. gil company found a company that is willing to buy the equipment for $18,000. what is the amount of the gain or loss on this transaction? (and please be sure to write the word "ga

Answer 1

Loss on the transaction is $37,000

As per given data

Cost of Cages = $206,790

Accumulated depreciation = $186,111

Selling Price = $18,611.10

Sale price of Asset is compared with the net book value of that asset to calculate the gain or loss arising from the sale of asset.

Net book value is the net value of the cost of asset and the accumulated depreciation of that asset.

Net Book Value = Cost of Cages - Accumulated depreciation

Net Book Value = $225,000 - $170,000 = $55,000

Selling Price = $18,000

Loss on Sale of asset = $55,000 - 18,000 = $37,000

Therefore,

Loss on the transaction is $37,000

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