On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. Strike found a company that is willing to buy the equipment for $55,000. What is the amount of the gain or loss on this transaction?
A) Cannot be determined
B) No gain or loss
C) Gain of $25,000
D) Gain of $55,000

Question

Quizplus · Accepted Answer

To calculate the gain or loss, we need to compare the sale price ($55,000) with the book value of the equipment.
Book value = Initial cost - Accumulated depreciation
Book value = $215,000 - $185,000
Book value = $30,000

Since the sale price is higher than the book value, we have a gain on the transaction:
Gain = Sale price - Book value
Gain = $55,000 - $30,000
Gain = $25,000

Therefore, the answer is (C) Gain of $25,000.

On December 31, Strike Company Has Decided to Sell One