Answer:
Book value by December 31,2018=$26,000
gain on the sale by December 31, 2018=$1,200
Explanation:
The expression for the accumulated depreciation is as follows;
depreciable cost=Acquisition cost-residual value
where;
acquisition cost=$43,000
residual value=$500
replacing;
depreciable cost=43,000-500=$42,500
depreciable cost=$42,500
The annual depreciation can be expressed as;
annual depreciation=depreciable cost/estimated life
where;
depreciable cost=$42,500
estimated life=5 years
replacing;
annual depreciation=42,500/5=8,500
annual depreciation=$8,500
Accumulated depreciation after 2 years=annual depreciation×2=(8,500×2)=$17,000
Book value=acquisition cost-accumulated depreciation
where;
acquisition cost=$43,000
accumulated depreciation=$17,000
replacing;
Book value=43,000-17,000=$26,000
net gain/loss=sale-book value
net gain/loss=27,200-26,000
gain on the sale by December 31, 2018=$1,200
