Nicklaus Company has decided to sell one of its old machines on June 30, 2010. The machine was purchased for $120,000 on January 1, 2006, and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $39,000, what was the amount of the gain or loss recorded at the time of the sale?
A) $27,000.
B) $81,000.
C) $33,000.
D) $69,000.

Question

Quizplus · Accepted Answer

The machine was depreciated for 4.5 years (from January 1, 2006, to June 30, 2010). Annual depreciation is $12,000 ($120,000 / 10 years). Total depreciation is $54,000 ($12,000 x 4.5 years). The book value at the time of sale is $66,000 ($120,000 - $54,000). The loss is $27,000 ($66,000 - $39,000).

Nicklaus Company Has Decided to Sell One of Its Old