Answer:
selling price= $199,633
Explanation:
<u>First, we need to calculate the book value at the moment of the sale:</u>
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (980,000 - 56,500) / 5
Annual depreciation= $184,700
Accumulated depreciation= (4*184,700) + (184,700/12)*4
Accumulated depreciation= $800,367
<u>Book value on May 1st:</u>
Book value= purchase price - accumulated depreciation
Book value= 980,000 - 800,367
Book value= $179,633
<u>Now, if the company makes a profit, the selling price was higher than the book value:</u>
<u></u>
Gain= selling price - book value
20,000= selling price - 179,633
selling price= $199,633
