On June 1, 2018, ABC Company paid $162,000 to purchase equipment. The equipment was assigned a salvage value of $18,000 and a life of 15 years. The equipment will be depreciated using the straight-line depreciation method. On April 30, 2026, ABC Company sold the equipment for $92,000 cash. Calculate the amount of the gain recorded on the sale of the equipment. Do not enter your answer with a minus sign in front of the number.
Can you please show me the solution steps of the problem in order clearly? Thank you!!
Annual depreciation = (Cost price - Salvage value)/Useful life
= (162,000 - 18,000)/15
= 144,000/15
= $9,600
Depreciation expense for 7 months of 2018 = 9,600 x 7/12
= $5,600
Depreciation for 4 months of 2026 = 9,600 x 4/12
= $3,200
| Depreciation expense for 2018 | 5,600 |
| Depreciation expense from 2019 - 2025 (9,600 x 7) | 67,200 |
| Depreciation expense for 2026 | 3,200 |
| Total depreciation charged | $76,000 |
Book value of equipment on April 30, 2026 = Cost price - Accumulated depreciation
= 162,000 - 76,000
= $86,000
Sale price of equipment = $92,000
Gain on sale of equipment = Sale price of equipment - Book value of equipment on April 30, 2026
= $6,000
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