A piece of equipment that cost $32,400 and on which $18,000 of accumulated depreciation had been recorded was disposed of on January 2, the first day of business of the current year. For each of the following assumptions, compute the gain or loss on the disposal: 1. The equipment was discarded as having no value. 2. The equipment was sold for $6,000 cash. 3. The equipment was sold for $18,000 cash
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A piece of equipment that cost $32,400 and on which $18,000 of
1. The equipment was discarded as having no value.
2. The equipment was sold for $6,000 cash.
3. The equipment was sold for $18,000 cash
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