On april 1 of the current year, la presa company sells some equipment for $18,000. the original cost was $50,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. straight-line depreciation is used. on january 1 of the current year, the accumulated depreciation account had a balance of $28,000. how much is the gain or loss on the sale?
(a) $2,600 loss
(b) $300 gain
(c) $850 loss
(d) $5,400 gain

Loss = $20,250 - $18,000 = $2,250

Explanation:

Provided cost of equipment  = $50,000

Salvage value = $8,000

Expected life = 6 years

Annual straight line depreciation = ($50,000 - $8,000)/6 years = $7,000

Accumulated balance of depreciation = $28,000

That is $28,000/$7,000 = 4 Years

Asset is sold on 1st April, therefore depreciation for the period 1 Jan To 31 March shall also be charged =

Therefore accumulated depreciation as on 1 April = $28,000 + $1,750 = $29,750.

Book value as on 1 April = $50,000 - $29,750 = $20,250

Sale value of asset = $18,000

Loss = $20,250 - $18,000 = $2,250

Explanation:

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