On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What gain should be recognized on the sale?

Question

Quizplus · Accepted Answer

The accumulated depreciation from January 1, 2008, to May 1, 2015, is calculated as follows: Annual depreciation = ($750,000 - $75,000) / 10 = $67,500. Total depreciation for 7 years and 4 months = $67,500 * 7 + ($67,500 / 12 * 4) = $472,500 + $22,500 = $495,000. The book value on May 1, 2015, is $750,000 - $495,000 = $255,000. The gain on sale is $300,000 - $255,000 = $45,000.

On May 1, 2015, Pinkley Company Sells Office Furniture for $300,000