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:

Question

Linda

Business

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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Melissa Miller · Answer 1

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