Rite Company purchased a machine on January 1, 2018 for $72,000. The company estimates that the machine will have a $6,000 salvage value at the end of its 10 year useful life. On September 30, 2022 the machine was sold for a gain of $5,250.
What must have been the selling price of the machine?
A) $43,050
B) $35,400
C) $45,900
D) $52,500

Question

Quizplus · Accepted Answer

The depreciation expense per year is calculated as (Cost - Salvage Value) / Useful Life = ($72,000 - $6,000) / 10 = $6,600 per year. By September 30, 2022, the machine has been depreciated for 4 years and 9 months (4.75 years). Total depreciation = $6,600 * 4.75 = $31,350. The book value on September 30, 2022, is Cost - Accumulated Depreciation = $72,000 - $31,350 = $40,650. To find the selling price, add the gain to the book value: $40,650 + $5,250 = $45,900.

Rite Company Purchased a Machine on January 1, 2018 for $72,000