On May 1, 2014, Pinkley Company sells office furniture for €60,000 cash. The office furniture originally cost €150,000 when purchased on January 1, 2007. Depreciation is recorded by the straight-line method over 10 years with a residual value of €15,000. What gain should be recognized on the sale?

Question

Quizplus · Accepted Answer

The annual depreciation is (€150,000 - €15,000) / 10 = €13,500. From January 1, 2007, to May 1, 2014, 7 years and 4 months have passed, so the accumulated depreciation is €13,500 * 7.33 = €99,000. The book value on May 1, 2014, is €150,000 - €99,000 = €51,000. The gain is €60,000 (sale price) - €51,000 (book value) = €9,000.

On May 1, 2014, Pinkley Company Sells Office Furniture for €60,000