Nicklaus Company has decided to sell one of its old machines on June 30, 2018. The machine was purchased for $200,000 on January 1, 2014, and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $65,000, what was the amount of the gain or loss recorded at the time of the sale?

Question

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The machine was depreciated for 4.5 years (from January 1, 2014, to June 30, 2018). Annual depreciation is $20,000 ($200,000/10 years). Total depreciation is $90,000 (4.5 years x $20,000). The book value at the time of sale is $110,000 ($200,000 - $90,000). The machine was sold for $65,000, resulting in a loss of $45,000 ($110,000 - $65,000).

Nicklaus Company Has Decided to Sell One of Its Old