On January 1, 2018, Lumos Company purchased a machine for $70,200. Lumos uses straight-line depreciation and estimates an eight-year useful life and an $5,400 salvage value. On December 31, 2021, Lumos sells the machine for $42,000.
In recording this sale, Lumos should reflect:
A) A $4,200 gain
B) A $1,200 loss
C) A $9,600 gain
D) No gain or loss

Question

Quizplus · Accepted Answer

($70,200 - $5,400) / 8 = $8,100 annual depreciation
$70,200 - (4 x $8,100) = $37,800 book value at disposal date
$42,000 proceeds - $37,800 book value = $4,200 gain on sale

On January 1, 2018, Lumos Company Purchased a Machine for $70,200