Prinkle Company had purchased equipment for $50,000 on January 1, 2015. On December 31, 2017, the company sold the equipment for $23,000. Accumulated Depreciation as of December 31, 2017 was $25,000. Calculate gain or loss on sale.

Question

Quizplus · Accepted Answer

To calculate the gain or loss on sale of equipment, we need to subtract the accumulated depreciation from the original cost of the equipment. 
Cost of Equipment = $50,000
Accumulated Depreciation = $25,000
Book Value of Equipment (as of December 31, 2017) = $50,000 - $25,000 = $25,000
Proceeds from Sale = $23,000
Since the proceeds from sale are less than the book value, there is a loss on sale.
Loss on Sale = Proceeds from Sale - Book Value = $23,000 - $25,000 = $2,000 loss.

Prinkle Company Had Purchased Equipment for $50,000 on January 1