The records of Pam Company showed the following about a machine on January 1, 20H: Purchased 1/1/20E for $35,000 Accumulated depreciation at January 1, 20H, $26,400
On July 1, 20H, the machine was sold for $7,000. Depreciation for the first six months of 20H was $1,467. The gain or loss on disposal would be which of the following?
A) $133 gain.
B) $133 loss.
C) $1,600 loss.
D) $1,600 gain.

Question

Quizplus · Accepted Answer

First, calculate the book value of the machine at the time of sale:
Book value = Purchase price - Accumulated depreciation
Book value = $35,000 - $26,400
Book value = $8,600

Then, calculate the gain or loss on disposal:
Sale price - Book value - Depreciation expense for the period
$7,000 - $8,600 - $1,467
= $133 loss

The Records of Pam Company Showed the Following About a Machine