On January 1, 2012, Mill Corporation purchased for $760,000, equipment having a useful life of ten years and an estimated salvage value of $40,000. Mill has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2020, the equipment was sold for $140,000. As a result of this sale, Mill should recognize a gain of A. $ - 0 - B. $68,000. C. $28,000. D. $140,000.

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Business

Issac Mcbride

16 February, 19:05

On January 1, 2012, Mill Corporation purchased for $760,000, equipment having a useful life of ten years and an estimated salvage value of $40,000. Mill has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2020, the equipment was sold for $140,000. As a result of this sale, Mill should recognize a gain of A. $ - 0 - B. $68,000. C. $28,000. D. $140,000.

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Answers (1)

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Caylee Wang · Answer 1

Selling gain = $68,000

Explanation:

Giving the following information:

Purchasing price = $760,000

Useful life = 10 years

Salvage value of $40,000.

On December 31, 2020, the equipment was sold for $140,000.

First, we need to calculate the accumulated depreciation.

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (760,000 - 40,000) / 10

Annual depreciation = 72,000

Accumulated depreciation = 72,000*9 = $648,000

To calculate the gain or loss, we need to compare the book value with the selling price:

Book value = 720,000 - 648,000 = 72,000

Selling price = 140,000

Selling gain = $68,000