Question

On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000 Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $55,000. What is the amount of the gain or loss on this transaction? a. Gain of $55,000 b Gain of $5,000 c. No gain or loss d. Cannot be determined

Answer 1

Answer:

b Gain of $5,000

Explanation:

Book value of equipment on the date of sale = Cost of the equipment - Accumulated depreciation

= $310,000 - $260,000 = $50,000

Gain on sale of equipment

= Proceeds from sale - Book value of equipment on the date of sale

= $55,000 - $50,000

= $5,000

Therefore, The amount of the gain or loss on this transaction is $5,000.