On January 1, 2017, Twinkle, Inc. purchased a machine for $160,000. Twinkle uses straight-line depreciation and estimates a seven-year useful life and a $6,000 salvage value. On December 31, 2023, Twinkle cannot locate a buyer for the used machine so it is scrapped.
In recording the machine retirement, Twinkle should reflect:
A) No gain or loss
B) A $6,000 gain
C) A $6,000 loss
D) A $154,000 loss

Question

Quizplus · Accepted Answer

($160,000 - $6,000) / 7 = $22,000 annual depreciation
$160,000 - (7 x $22,000) = $6,000 book value at disposal date
= $6,000 loss on retirement