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25 September, 13:26

Bowie Company uses a calendar year and the straight line depreciation method. On December 31, 2018, after adjusting entries were posted, Bowie Company sold a machine which was originally purchased on January 1, 2015. The historical cost was $24,000, the salvage value assumed was $2,000 and the original estimated life was five years ... It was sold for $4,400 cash. Using this information, how much should be recorded on December 31 for the Gain or (Loss) ? Round to whole dollars.

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  1. 25 September, 13:53
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    There is no gain or loss as the sale value ie equal to the net book value

    Explanation:

    Computation of gain or loss on disposal of equipment

    Historical cost of machine $ 24,000

    Less: Estimated salvage value $ 2,000

    Depreciable basis $ 22,000

    Estimated useful life 5 years

    Depreciation cost per year $ 22,000/5 $ 4,400

    Depreciation charged for the period

    January 1 2015 to December 31 2018 = 4 years

    $ 4,400 * 4 years $ 17,600

    Net book value of machine on date of sale

    $ 22,000 - $ 17,600 $ 4,400

    Sale value of machine $ 4,400

    Gain or Loss 0
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