Nicklaus Company has decided to sell one of its old machines on June 30, 2021.The machine was purchased for $200,000 on January 1, 2017, 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's annual depreciation is $200,000 / 10 = $20,000. By June 30, 2021, 4.5 years of depreciation have occurred, totaling $20,000 * 4.5 = $90,000. The book value at the time of sale is $200,000 - $90,000 = $110,000. Selling the machine for $65,000 results in a loss of $110,000 - $65,000 = $45,000.

Nicklaus Company Has Decided to Sell One of Its Old