On January 1, 2017, the Accumulated Depreciation-Machinery account of a particul

Question

On January 1, 2017, the Accumulated Depreciation-Machinery account of a particular company showed a balance of dollar 370,000. At the end of 2017, after the adjusting entries were posted, it showed a balance of dollar 395,000. During 2017, one of the machines which cost dollar 125,000 was sold for dollar 60,500 cash. This resulted in a gain of dollar 4,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2017? dollar 85,500 dollar 93,500 dollar 25,000 dollar 60,500 dollar 35,500

Explanation / Answer

Gain on sale of machinery = Sale - (Cost - Accumulated Dep on Machinery)

4000 = 60500 - (125000 - Accum Dep)

Accum Dep = 68500

Depreciation for the year = Closing Bal of Accum Dep + Accum Dep on Machine sold - Opening bal of Accum Dep

= 395000 + 68500 - 370000

= 93500

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