Ask Question
25 January, 21:58

On January 1, 2012, Waterway Industries purchased for $720000, equipment having a useful life of ten years and an estimated salvage value of $48000. Waterway has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2020, the equipment was sold for $147500. As a result of this sale, Waterway should recognize a gain of a. $147500

b. $80300

c. $32300

d. $0.

+5
Answers (1)
  1. 25 January, 22:25
    0
    As a result of this sale, Waterway should recognize a gain of $32,300 (Option C).

    Explanation:

    Under straight-line method, depreciation is an allocation of the cost of an asset over its estimated useful life and it is expressed with this formula: (cost - residual value) / No of years = ($720,000 - $48,000) / 10 years = $67,200 yearly depreciation expense.

    Accumulated depreciation from January 1, 2012 to December 31, 2020 (9 Years) is $67,200 x 9 years $604,800.

    So, the net book value (NBV) of the asset (expressed as Cost - Accumulated depreciation) is $720,000 - $604,800 = $115,200.

    Gain or (loss) on disposal = Sales proceed - NBV = $147,500 - $115,200 = $32,300.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “On January 1, 2012, Waterway Industries purchased for $720000, equipment having a useful life of ten years and an estimated salvage value ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers