On January 1, 2015, Minco Coportation purchased, for $100,000, equipment having a useful life of the eight years and an estimated salvage value of $4,000. Minco has recorded monthly depreciation of the equipment on the straight-line method. On January 1, 2020, the equipment was sold for $39,000. As a result if this sale, Minco should recognize a. $0 b. a $1,500 gain c. a $1,000 loss d. a $13,000 loss
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.
On January 1, 2015, Minco Coportation purchased, for $100,000, equipment having a useful life of the eight years and an estimated salvage value of $4,000. Minco has recorded monthly
a. $0
b. a $1,500 gain
c. a $1,000 loss
d. a $13,000 loss
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