On May 1 2017 Pinkley Company sells office furniture for $300000 cash. The office furniture originally cost $750000 when purchased on January 1 2010. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75000. What gain should be recognized on the sale?

Question

Quizplus · Accepted Answer

The accumulated depreciation from January 1, 2010, to May 1, 2017, is calculated as follows: Annual depreciation = ($750,000 - $75,000) / 10 = $67,500. Depreciation for 7 years and 4 months = $67,500 * 7 + ($67,500 / 12) * 4 = $472,500. The book value on May 1, 2017, is $750,000 - $472,500 = $277,500. The gain on sale is $300,000 - $277,500 = $22,500.

On May 1 2017 Pinkley Company Sells Office Furniture for $300000