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Jing Company was started on January 1,2016 when it issued common stock for $50,000 cash.Also,on January 1,2016 the company purchased office equipment that cost $34,000 cash.The equipment was delivered under terms FOB shipping point,and transportation cost was $2,000.The equipment had a five-year useful life and a $12,000 expected salvage value.
-Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in 2018.Using straight-line depreciation and assuming that the office equipment was sold on December 31,2018 for $16,000,the amount of net income or (loss)appearing on the December 31,2018 income statement would be:
A)($6,600).
B)$6,600.
C)$600.
D)$5,400.

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Jing Company was started on January 1,2016 when it issued common stock for $50,000 cash.Also,on January 1,2016 the company purchased office equipment that cost $34,000 cash.The equipment was delivered under terms FOB shipping point,and transportation cost was $2,000.The equipment had a five-year useful life and a $12,000 expected salvage value.
-Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in 2018.Using straight-line depreciation and assuming that the office equipment was sold on December 31,2018 for $16,000,the amount of net income or (loss)appearing on the December 31,2018 income statement would be:
A)($6,600).
B)$6,600.
C)$600.
D)$5,400.

Quizplus · Accepted Answer

The net income is calculated as follows: Revenue ($30,000) - Expenses ($19,000) - Depreciation ($4,800) + Gain on Sale of Equipment ($600) = $600. Depreciation is calculated as ($34,000 + $2,000 - $12,000) / 5 years = $4,800 per year. The book value of the equipment at the time of sale is $26,400 - $14,400 (accumulated depreciation for 3 years) = $12,000. The gain on sale is $16,000 - $12,000 = $4,000.

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