Question

On December 31, 2018, AAA disposed an Equipment (Cost: $50,000, Salvage Value: $10,000, useful life: 4 years), which was purchased on January 1, 2016. By disposing this equipment, AAA has a , and the amount is___________.

Answer 1

Answer:

A Loss of $10,000

Explanation:

To calculate the depreciation using the straight line method.

Depreciation = Cost - Salvage value/ no. of years

   

       $50,000   -   $10,000/ 4 = $10,000

Annual depreciation now is:    $10,000

Net book Value (NBV) for the year of disposal i.e 2018 will be:

Cost - Accumulated Depreciation = NBV

$50,000 - $30,000 = $20,000

NBV is $20,000

but was sold for $10,000 which is a loss of $10,000