Question

On December 31, Strike Company sold one of its batting cages for $55,000. The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. What is the amount of the gain or loss on this transaction?

Answer 1

Answer:

$5,000.

Explanation:

To calculate the gain or loss on sale of Property, Plant, and Equipment, the worth of the asset at selling time that is its Carrying Value (Cost - Accumulated Depreciation) is compared with the Sale Proceeds.

⇒ Gain / (Loss) = 55,000 - (310,000 - 260,000) = $5,000.

Strike Company has sold an equipment worth of $50,000 for $55,000, hence making a gain of $5,000 on this transaction. This gain is recorded in the Statement of Profit or Loss.