Nicklaus Company has decided to sell one of its old machines on June 30, 2014. The machine was purchased for $160,000 on January 1, 2010, and was depreciated on a straight-line basis for 10 years with no residual value. If the machine was sold for $52,000, what was the amount of the gain or loss recorded at the time of the sale?

Question

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The machine's annual depreciation is $16,000 ($160,000/10 years). By June 30, 2014, 4.5 years of depreciation have occurred, totaling $72,000 (4.5 * $16,000). The book value at sale is $88,000 ($160,000 - $72,000). The loss is $36,000 ($52,000 sale price - $88,000 book value).

Nicklaus Company Has Decided to Sell One of Its Old