Question

An asset was acquired on October 1, 2021, for $78,000 with an estimated five-year life and $13,000 residual value. The company uses units-of-production depreciation and expects the asset to produce 20,000 units. Calculate the gain or loss if the asset was sold on March 31, 2024, for $58,000. Actual production was: 2021 = 500 units; 2022 = 3,000 units; 2023 = 3,500 units; 2024 = 1,000 units.

Answer 1

Based on the information given  the gain or loss if the asset was sold on March 31, 2024 is $6,000 gain.

Depreciation per units= (Original cost - Residual value) ÷ (Estimated production units)

Depreciation per units= ($78,000 - $13,000) ÷ 20,000 units

Depreciation per units= $65,000 ÷ 20,000 units

Depreciation per units= $3.25 per units

Accumulated depreciation=(500 units × $3.25)+( 3,000 units × $3.25)+(3,500 units × $3.25)+( 1,000 units × $3.25)

Accumulated depreciation= $1,625 + $9,750 + $11,375 + $3,250

Accumulated depreciation= $26,000

Book value= Acquired value of an asset - Accumulated depreciation  

Book value= $78,000 - $26,000

Book value= $52,000

Gain or Loss= Sale value - Book value

Gain or Loss= $58,000 - $52,000

Gain or Loss= $6,000 gain

Inconclusion the gain or loss if the asset was sold on March 31, 2024 is $6,000 gain.

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