Francisco purchased a machine on Jan 1, 2010 for $600,000. The machine had an estimated useful life of 10 years and an estimated residual value of $10,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2012 for $350,000. What was the gain/loss on disposal of the machine?

Question

Quizplus · Accepted Answer

The annual depreciation for the machine is (600,000-10,000)/10 = $59,000. 
The monthly depreciation is $59,000/12 = $4,917. 
From Jan 1, 2010 to Dec 31, 2012, the machine was depreciated for 36 months, so the accumulated depreciation is $4,917 x 36 = $176,412. 
The book value of the machine on Dec 31, 2012 is $600,000 - $176,412 = $423,588. 
Thus, the company recorded a loss on disposal of $73,412 ($423,588 - $350,000). 
Therefore, the answer is C.

Francisco Purchased a Machine on Jan 1, 2010 for $600,000