On January 1, Year 1, Jing Company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms free on board (FOB)shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in Year 3. The company uses the straight-line method. The office equipment was sold on December 31, Year 3 for $16,000. 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, and the gain or loss on the sale of the equipment. The equipment's annual depreciation is ($34,000 + $2,000 - $12,000) / 5 = $4,800. By Year 3, accumulated depreciation is $4,800 * 3 = $14,400. The book value at sale is $36,000 - $14,400 = $21,600. The loss on sale is $21,600 - $16,000 = $5,600. Net income is $30,000 (revenue) - $19,000 (expenses) - $5,600 (loss) = $5,400.

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