On January 1, 2006, Mill Corporation purchased for $608,000, equipment having a useful life of ten years and an estimated salvage value of $32,000. Mill has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2014, the equipment was sold for $112,000. As a result of this sale, Mill should recognize a gain of

Question

Quizplus · Accepted Answer

The cost of the equipment is $608,000 with a salvage value of $32,000, giving a depreciable base of $576,000 over ten years. Annual depreciation is $576,000 / 10 = $57,600. Over 9 years (from 2006 to 2014), the total depreciation is $57,600 * 9 = $518,400. The book value at the time of sale is $608,000 - $518,400 = $89,600. The sale price is $112,000, so the gain on sale is $112,000 - $89,600 = $22,400.

On January 1, 2006, Mill Corporation Purchased for $608,000, Equipment