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amid [387]
3 years ago
10

The Cromwell Company sold equipment for $35,000. The equipment, which originally cost $120,000 and had an estimated useful life

of 10 years and $20,000 residual value, was depreciated for four years using the straight-line method. Cromwell should report the following on its income statement in the year of sale:
A. A $25,000 gain.
B. A $45,000 loss.
C. A $45,000 gain.
D. All of these answer choices are incorrect.
Business
1 answer:
Alla [95]3 years ago
5 0

Answer:

B

Explanation:

Original Cost -$120,000

Useful life -10 years

Residual Value - $20000

Annual depreciation - $(120,000-20000)/10 = $10,000

Accumulated depreciation for 4 years = 10*4= $40000

Book value at disposal = $120,000-$40000= $80000

Sales value = $35,000

Loss on disposal = $80,000-$35000= $45,000

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