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OleMash [197]
2 years ago
15

On March 1 of the current year, La Presa Company sells some equipment for $30,000. The original cost was $60,000, the estimated

salvage value was $12,000, and the expected useful life was 6 years. Straight-line depreciation is used. On January 1 of the currentyear, the Accumulated Depreciation account had a balance of $32,000. How much is the gain or loss on the sale?
Business
1 answer:
bogdanovich [222]2 years ago
5 0

Answer:

They had a gain of $3,333.33

Explanation:

The expression for the accumulated depreciation is as follows;

depreciable cost=Acquisition cost-salvage value

where;

acquisition cost=$60,000

residual value=$12,000

replacing;

depreciable cost=60,000-12,000=$48,000

depreciable cost=$48,000

The annual depreciation can be expressed as;

annual depreciation=depreciable cost/estimated life

where;

depreciable cost=$48,000

estimated life=6 years

replacing;

annual depreciation=48,000/6=8,000

annual depreciation=$8,000

depreciation between January 1 and March 1=(2/12)×8,000=$1,333.33

depreciation by March 1=1,333.33+32,000=$33,333.33

Profit/loss=sale-book value by March 1

book value by March 1=60,000-33,333.33=$26,666.67

Profit/loss=30,000-26,666.67=$3,333.33

They had a gain of $3,333.33

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The preparation of the classified balance sheet is presented below:

<u>Valley Pump Corporation</u>

<u>Balance sheet</u>

<u>December 31, 2018</u>

Assets

Current assets

Cash                                    $30,000              

Marketable securities           $27,000

Account receivable             $61,000

Inventory                               $91,000

Prepaid expense                   $37,000

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Buildings                    $325,000

Equipment                  $85,000

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Intangibles

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Liabilities & shareholder equity

Current liabilities

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Interest payable                          $15,000

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Note payable                              $110,000

Current maturities                      $55,000

Total current liabilities                $275,000

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Shareholder equity

Common stock           $250,000

Retained earnings      $60,000

Total shareholder equity               $310,000

Total liabilities & shareholder equity $695,000

Working notes

Accumulated depreciation = building + equipment

= $105,000 + $60,000

= $695,000

The note payable is

= $55,000 × 2

= $110,000

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