Answer:
Loss on Sale of Equipment = $10,000.
Explanation:
The gain or loss on sale of Property, plant, and Equipment is calculated by comparing Carrying Value (Cost - Accumulated Depreciation) and Sale Proceeds. The carrying value of a machine at the end of 4th year is:
CV = 78,000 - { [ (78,000 - 3,000) / 5 ] * 4} = 78,000 - 60,000 = $18,000.
<u>Calculating Gain/Loss:</u>
Gain / (Loss) = Carrying value - Sales Proceeds = 18,000 - 8,000 = ($10,000).
Because the company has sold a machine worth of $18,000 for $8,000, so it has incurred a loss of $10,000 on the transaction. This loss is recognized in the Statement of Profit or Loss.
