Question

Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000. Calculate the gain or loss to be recorded on the sale of equipment.

Answer 1

Answer:

Loss= $5,000

Explanation:

Giving the following information:

Selling price= $50,000

Purchase price= $85,000

Accumulated depreciation= $30,000

First, we need to calculate the book value:

Book value= Purchase price - Accumulated depreciation

Book value=  85,000 - 30,000 = $55,000

If the selling price is higher than the book value, the company gain from the sale.

Gain/loss= selling price - book value

Gain/loss= 50,000 - 55,000

Loss= $5,000