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Lady bird [3.3K]
3 years ago
12

On January 1, 2018, Lumos Company purchased a machine for $70,200. Lumos uses straight-line depreciation and estimates an eight-

year useful life and an $5,400 salvage value. On December 31, 2021, Lumos sells the machine for $42,000. In recording this sale, Lumos should reflect:
Business
1 answer:
jeka943 years ago
6 0

Answer:

Gain= $4,200

Explanation:

Giving the following information:

Purchase price (2018)= $70,200

Salvage value= $5,400

Useful life= 8 years

Selling price= $42,000

<u>First, we need to calculate the depreciation expense and accumulated depreciation:</u>

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (70,200 - 5,400) / 8

Annual depreciation= $8,100

Accumulated depreciation (ending 2021)= 8,100*4= $32,400

<u>If the selling price is higher than the book value, the company gain from the sale. Now, we need to determine the book value.</u>

<u></u>

Book value= purchase price - accumulated depreciation

Book value= 70,200 - 32,400= $37,800

Gain/loss= selling price - book value

Gain/loss= 42,000 - 37,800

Gain= $4,200

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