On January 2, 2016, Hannah Company sold a machine for $1,000 that it had used for several years.The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale.What gain or loss will be reported on the income statement for the sale of the machine?

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the sale of the machine, we need to subtract the machine's cost from the amount it was sold for.

Amount received from sale = $1,000

Book value of machine = cost - accumulated depreciation = $12,000 - $9,000 = $3,000

Since the amount received from the sale ($1,000) is less than the book value of the machine ($3,000), Hannah Company will report a loss on the sale of the machine.

Loss on sale = amount received - book value = $1,000 - $3,000 = -$2,000

The negative sign indicates a loss, so the answer is C, loss of $2,000.

On January 2, 2016, Hannah Company Sold a Machine for $1,000