Answer to Question #308491 in Marketing for Hula

Question

Equipment purchased on January 3, 2008, for$80,000 was depreciated using the straight-line method based upon a 5-year life and $7,500 residual value. The equipment was sold on December 31, 2010, for $40,000.what is the gain on the sale of the equipment?

Answer 1

Depreciation = (Cost of the Asset - Residual Value)/Useful life of the Asset

Depreciation = (80,000-7,500)/5

Depreciation = $14,500

After 3 years its sold, the total depreciation is $43,500

Gain on sale of the equipment = $40,000-$43,500

Gain on sale of the equipment =$3,500