Question

On June 1, 2019, XYZ Company paid $129,000 to purchase equipment.
The equipment was assigned a residual value of $12,000 and a life
of 15 years. The equipment will be depreciated using the straight
line depreciation method.

On March 31, 2028, XYZ Company sold the equipment and recorded a
gain on the sale of $7,140.

Calculate the selling price of the equipment at March 31, 2028.

Answer 1

Ans. A	Annual depreciation = (Cost of asset - Residual value) / Useful life in years
	($129,000 - $12,000) / 15
	$117,000 / 15
	$7,800
	Year	Annual depreciation (a)	Fraction of year (b)	Actual depreciation (a*b)
	2019	$7,800	7/12	$4,550
	2020	$7,800	12/12	$7,800
	2021	$7,800	12/12	$7,800
	2022	$7,800	12/12	$7,800
	2023	$7,800	12/12	$7,800
	2024	$7,800	12/12	$7,800
	2025	$7,800	12/12	$7,800
	2026	$7,800	12/12	$7,800
	2027	$7,800	12/12	$7,800
	2028	$7,800	3/12	$1,950
	Accumulated depreciation			$68,900
	Book value of equipment = Cost of equipment - Accumulated depreciation
	$129,000 - $68,900
	$60,100
	Selling price of equipment = Book value of equipment + Gain on sale of equipment
	$60,100 + $7,140
	$67,240
	Sales value > Book value = Gain on sale of equipment
	Sales value < Book value = Loss on sale of equipment
	Sales value = Book value = No profit no loss
	*In Straight line method the depreciation is equal in each year.
	*In year 2019 the equipment was used only for 7 months (1 June - 31 December).
	*In year 2028 the equipment was used only for 3 months (1 January - 31 March).