On 31 December 2013 a printing machine with a cost of $380 000 has accumulated depreciation written off of $140 000. If it is sold for $220 000 on 1 January 2014 what will be the net effect of the sale on the income statement?
A) $20 000 profit
B) $20 000 loss
C) $160 000 loss
D) $80 000 profit

Question

Quizplus · Accepted Answer

The net book value (NBV) of the machine is calculated by subtracting the accumulated depreciation from the original cost:
$380,000 - $140,000 = $240,000 NBV

When the machine is sold for $220,000, it results in a loss on disposal:
$220,000 (selling price) - $240,000 (NBV) = -$20,000

Since the sale resulted in a loss, the net effect on the income statement is also a loss of $20,000. Therefore, the correct answer is B) $20,000 loss.

On 31 December 2013 a Printing Machine with a Cost