Question

An asset was acquired on August 1, 2021, for $25,000 with an estimated five-year life and $1,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on April 30, 2023, for $15,000. Partial-year depreciation is calculated based on the number of months the asset is in service.

Answer 1

Depreciation per year = ( Cost - Estimated Salvage value ) / Estimated useful life = ( 25000 - 1000 ) / 5

4,800

Depreciation for year 2021 [ 4800 * 5 / 12 ]	2,000
Depreciation for 2022	4,800
Depreciation for year 2023 [ 4800* 4 / 12 ]	1600
Accumulated depreciation as on April 30, 2023	8,400

Cost	25,000
(-) Accumulated depreciation as on April 30, 2023	8,400
Written down value as on April 30, 2023	16,600

Sales value	15,000
(-) Written down value as on April 30, 2023	16,600
Gain (loss)	-1,600

So, the answer is : $1,600 loss