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
