Francisco purchased a machine on Jan 1, 2019 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, 2024 for $350,000. What was the gain/loss on disposal of the machine?

Question

Quizplus · Accepted Answer

The annual depreciation is calculated as (Cost - Residual Value) / Useful Life = ($600,000 - $10,000) / 10 = $59,000 per year. Over 6 years (from 2019 to 2024 inclusive), the total depreciation is $59,000 * 6 = $354,000. The book value at the time of sale is Cost - Accumulated Depreciation = $600,000 - $354,000 = $246,000. The gain on sale is Sale Price - Book Value = $350,000 - $246,000 = $104,000.

Francisco Purchased a Machine on Jan 1, 2019 for $600,000