On January 1, 2010, Desmet Company purchased office equipment that cost $15,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,000. The equipment had a five year useful life and a $1,200 expected salvage value.
Assume that Desmet Company sold the office equipment on December 31, 2014 for $6,000, the amount of net income or (net loss) appearing on the December 31, 2014 income statement would be

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The cost of the equipment is $16,000 ($15,000 + $1,000). Depreciation per year is ($16,000 - $1,200) / 5 = $2,960. Accumulated depreciation over 5 years is $2,960 * 5 = $14,800. Book value at sale is $16,000 - $14,800 = $1,200. Selling price is $6,000, resulting in a gain of $6,000 - $1,200 = $4,800. However, the question asks for net income or loss, which is the gain minus the depreciation expense for the year, $4,800 - $2,960 = $1,840. Since the gain is greater than the depreciation, the net effect is a loss of $1,120.

On January 1, 2010, Desmet Company Purchased Office Equipment That