Jamison Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. $$\begin{array} { | l | c | c | }
\hline \text { At December 31 } & \text { Year 2 } & \text { Year 1 } \
\hline \text { Equipment } & \$ 610,000 & \$ 750,000 \
\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \
\hline
\end{array}$$

Question

Jamison Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. $$\begin{array} { | l | c | c | } 
\hline \text { At December 31 } & \text { Year 2 } & \text { Year 1 } \
\hline \text { Equipment } & \$ 610,000 & \$ 750,000 \
\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The book value of the equipment sold is calculated as the cost of the equipment minus its accumulated depreciation. The cost of the equipment sold is $140,000, and the accumulated depreciation is the difference between the Year 1 and Year 2 accumulated depreciation balances, which is $72,000 ($500,000 - $428,000). The book value is $68,000 ($140,000 - $72,000). The equipment was sold for a $5,000 gain, so the cash received is $73,000 ($68,000 + $5,000).

Jamison Company Reports Depreciation Expense of $35,000 for Year 2