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25 July, 19:22

Raine Company has a machine that originally cost $58,000. Depreciation has been recorded for four years using the straight-line method, with a $5,000 estimated salvage value at the end of an expected ten-year life. After recording depreciation at the end of four years, Raine sells the machine. Determine the gain or loss in each scenario if the machine sold for:

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  1. 25 July, 19:35
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    Answer:The gain is $5,700

    Explanation:

    Cost - Salvage value / useful life

    Cost=$58,000 Salvage value = $5,000 Useful life = 10 years

    58,000 - 5,000/10 = 5,300

    The yearly depreciation = $5,300

    $

    1st year cost. 53,0000

    Depreciation. (5,300)

    2nd year cost. 47,700

    Depreciation. (5,300)

    3rd year cost. 41,700

    Depreciation. (5,300)

    4th year cost. 36,400

    Depreciation. (5,300)

    Total. 31,100

    The net book value of the machine after 4 years = $ 31,100

    To calculate the Accumulated Depreciation

    = Yearly depreciation x Years the machine is sold

    = Yearly depreciation = $5,300. Years the machine was sold = 4

    5,300 * 4 = 21,200

    Accumulated depreciation = $21,200

    To calculate the cost of selling the machine

    Initial cost - Accumulated depreciation

    Initial cost = $58,000 Accumulated depreciation = $21,200

    58,000 - 21,200 = 36,800

    The machine will be sold for $36,800zAccounting entry will be

    Machine Cost.

    Dr Cr

    $ $

    Ist year Cost. 58,000

    4th year. Disposal.

    58,000

    58,000

    Accounting entry will be

    Dr Machine Cost. Cr

    $

    $

    Ist year Cost. 58,000

    4th year. Disposal. 58,000

    58,000

    58,000

    Accounting entry will be

    Dr Machine Cost. Cr

    $

    $

    Ist year Cost. 58,000

    4th year. Disposal. 58,000

    58,000

    Accounting entry will be

    Dr Machine Cost. Cr

    $

    $

    Ist year Cost. 58,000

    4th year. Disposal. 58,000

    58,000

    58,000

    Depreciation. Account

    Cr

    $

    $

    4th year. Disposal. 21,200

    I st year profit and loss 5,300

    2nd year profit and loss. 5,300

    3rd year. Profit and loss 5,300

    4th year profit and loss. 5,300

    21,200

    21,200

    Dr Disposal Account. Cr

    $

    $

    Ist year machine cost 58,000

    4th year cash. 31,100

    Profit and Loss (Gain) 5,700

    Accumulated depreciation 21,200

    58,000

    58,000
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