Orton Corporation, which has a calendar year accounting period, purchased a new machine for $80,000 on April 1, 2016. At that time Orton expected to use the machine for nine years and then sell it for $8,000. The machine was sold for $44,000 on Sept. 30, 2021. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be:
Orton Corporation, which has a calendar year accounting period, purchased a new machine for $80,000 on April 1, 2016. At that time Orton expected to use the machine for nine years and then sell it for $8,000. The machine was sold for $44,000 on Sept. 30, 2021. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be:
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...
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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.
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- Orton Corporation, which has a calendar year accounting period, purchased a new machine for $80,000 on April 1, 2016. At that time Orton expected to use the machine for nine years and then sell it for $8,000. The machine was sold for $44,000 on Sept. 30, 2021. Assuming straight-line
depreciation , no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be:
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