bennie razor company has decided to sell one of its old manufacturing machines on june 30, 2017. the machine was purchased for $80,000 on january 1, 2013, and was depreciated on a straight-line basis over a 10-year life assuming no salvage value. if the machine was sold for $26,000, how much is the gain or loss to be recorded at the time of the sale?

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anthougo anthougo · Answer 1 · 2021-11-25T11:00:53+01:00

Bennie Razor Company should recognize a loss of $10,000 at the time of the sale.

Data and Calculations:

Cost of machine = $80,000

Estimated useful life = 10 years

Date of purchase = June 30, 2007

Date of sale = Jan. 1, 2013

Period of use = 5.5 years (from June 30, 2007 to Jan. 1, 2013)

Annual depreciation on straight-line basis = $8,000 ($80,000/10)

Accumulated depreciation for 5.5 years = $44,00 ($8,000 x 5.5)

Net book value at sale date = $36,000 ($80,000 - $44,000)

Sales proceeds = $26,000

Loss recognized on sale = $10,000 ($36,000 - $26,000)

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