On July 1, 2022, Blossom Company sells equipment for $119000. The equipment originally cost $330000, had an estimated 5-year life and an expected salvage value of $50000. The Accumulated Depreciation account had a balance of $196000 on January 1, 2022, using the straight-line method. The gain or loss on disposal is

Gain = $13,000

Explanation:

Giving the following information:

Selling price = $119,000.

The equipment originally cost $330000, had an estimated 5-year life, and an expected salvage value of $50000.

The Accumulated Depreciation account had a balance of $196000.

First, we need to calculate the accumulated depreciation on July 1, 2022.

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (330,000 - 50,000) / 5 = $56,000

Depreciation for 2022 = (56,000/12) * 6 = 28,000

Accumulated depreciation = 196,000 + 28,000 = $224,000

The gain or loss is determined using the book value:

Book value = 330,000 - 224,000 = 106,000

Gain/loss = selling price - book value

Gain/loss = 119,000 - 106,000

Gain = $13,000