On January 1, 2012, Owl Corporation purchased equipment for $76,000, having a useful life of ten years and an estimated residual value of $4,000. Owl has recorded monthly depreciation using the straight-line method. On December 31, 2020, the equipment was sold for $14,000. The gain to be recognized from the sale is

Question

Quizplus · Accepted Answer

The cost of the equipment is $76,000, with a residual value of $4,000, giving a depreciable base of $72,000 over ten years. Annual depreciation is $72,000 / 10 = $7,200. Over 9 years (by the end of 2020), the total depreciation is $7,200 * 9 = $64,800. The book value at the time of sale is $76,000 - $64,800 = $11,200. The sale price is $14,000, so the gain is $14,000 - $11,200 = $2,800.

On January 1, 2012, Owl Corporation Purchased Equipment for $76,000