Sutherland Company purchased machinery for $1,120,000 on January 1, 2014. Straight-line depreciation has been recorded based on a $70,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $21,000. How much cash did Sutherland receive from the sale of the machinery?

a. $161,000.

b. $189,000.

c. $231,000.

d. $301,000.

C. $231,000

Explanation:

Straight line depreciation is calculated as Cost less salvage value divided by useful life of the asset which is $1,120,000-$70000=$1,050,000

Then divide it by the useful life which is 5 years.:

$1,050,000/5=$210,000

The asset has been fully depreciated at year 5 which is 2018, therefore, add the gain made on sales to the accumulated depreciation:

$210,000+$21,000=$231000