Question

Waterway Industries purchased machinery for $910000 on January 1, 2017. Straight-line depreciation has been recorded based on a $60000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2021 at a gain of $21500. How much cash did Waterway receive from the sale of the machinery?

$194833

$134833

$254833

$151833

Answer 1

Solution:

Calculation of sale value of machinery:

Depreciation = Cost - Salvage value/ useful life asset

Particulars	Amount
Cost of asset	$910,000
Less: Depreciation for 2017 ($910,000 -$60,000)/5	($170,000)
Less: Depreciation for 2018	($170,000)
Less: Depreciation for 2019	($170,000)
Less: Depreciation for 2020	($170,000)
Less: Depreciation for 2021 ($170,000*4 months/12 months)	($56,667)
Value	$173,333
Add: Gain on sale	$21,500
Sale of value of machinery	$194,833

Therefore the correct option is $194,833

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