Question

Sheffield Corp. purchased machinery for $915000 on January 1, 2017. Straight-line depreciation has been recorded based on a $59000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2021 at a gain of $12500. How much cash did Sheffield receive from the sale of the machinery?

Answer 1

Solution :

Cash Received from Sale of Machine is $ 185,633.

Working :

Gain on Sale of Machine = Sale Value - Book Value

$ 12,500 = Sale Value - $ 173,133

Sale Value = $ 173,133 + $ 12,500

Sale Value = $ 185,633   

Original Cost of Machine	$ 915,000
Less : Accumulated Depreciation [($ 915,000 - $ 59,000) / 5 * 4] + [($ 915,000 - $ 59,000) / 5 * 4/12]	$ 741,867
Book Value	$ 173,133

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