On January 1, Year 1, Jing Company purchased office equipment that cost $34,125 cash. The equipment was delivered under terms free on board (FOB)shipping point, and transportation cost was $2,125. The equipment had a five-year useful life and a $12,070 expected salvage value.Assume that Jing Company earned $30,100 cash revenue and incurred $19,100 in cash expenses in Year 3. The company uses the straight-line method. The office equipment was sold on December 31, Year 3 for $16,200. What is the company's net income (loss)for Year 3?

Question

Quizplus · Accepted Answer

The net income for Year 3 is calculated by considering the revenue, expenses, depreciation, and gain/loss on the sale of equipment. The annual depreciation is ($34,125 + $2,125 - $12,070) / 5 = $4,036. The accumulated depreciation by the end of Year 3 is $4,036 * 3 = $12,108. The book value at the time of sale is $34,125 + $2,125 - $12,108 = $24,142. The loss on sale is $24,142 - $16,200 = $7,942. The net income is $30,100 - $19,100 - $4,036 - $7,942 = $622.

On January 1, Year 1, Jing Company Purchased Office Equipment