Question

An asset was purchased for​ $33,000 on January​ 1, 2019. The​ asset's estimated useful life was five​ years, and its residual value was​ $4,000. The​ straight-line method of depreciation was used. Calculate the gain or loss if the asset is sold for​ $26,000 on December​ 31, 2019, the last day of the accounting period.

Answer 1

Answer:

loss of $1,200

Explanation:

Depreciation is the systematic allocation of cost to an asset. it is given as

Depreciation = (cost - salvage value)/useful life

When an asset is sold at an amount lower than its carrying or net book value, a loss on sale/disposal is recognized otherwise, a gain on disposal. The netbook value is the cost less accumulated depreciation.

Depreciation =  ($33,000 - $4,000)/5

= $5800

Netbook value at disposal = $33,000 - $5800

= $27,200

Gain/(loss) on disposal = $26,000 - $27,200

= ($1,200)