On January 1, 2013, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 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 compare the selling price ($5,000) to the book value of the machine, which is the cost of the machine minus accumulated depreciation. 
Book value = Cost - Accumulated depreciation 
Book value = $11,000 - $4,500 
Book value = $6,500 
Since the selling price ($5,000) is less than the book value ($6,500), the company will realize a loss on the sale. 
Loss = Selling price - Book value 
Loss = $5,000 - $6,500 
Loss = -$1,500 
Therefore, the answer is (C) loss of $1,500.

On January 1, 2013, a Company Sold a Machine for $5,000