On January 1, 2014, Tanaka, Inc. purchased equipment for $27,000. Tanaka uses straight-line depreciation and estimates a 10-year useful life and a $3,000 salvage value. On December 31, 2021, Tanaka sells the equipment for $14,200. In recording this sale, Tanaka should reflect:

Question

Quizplus · Accepted Answer

The equipment was purchased for $27,000 and depreciated over 10 years to a salvage value of $3,000. This means that the total depreciation expense over the 10 years is $27,000 - $3,000 = $24,000. The equipment was sold for $14,200, which is $24,000 - $14,200 = $9,800 less than the book value. This results in a gain of $9,800.