Question

Adelphi Company purchased a machine on January 1, 2017, for $70,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $23,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.

Answer 1

Answer:

Loss on Sale of Non-Current Asset is -$5,672.

Explanation:

The key points to remember here are:

• We compare Carrying Value (Cost - Accumulated Depreciation) with Selling Price to calculate gain/loss.
• Adelphi Company has used the machine for 4 years. So, deduct the depreciation of 4 years from the Cost of Machine.
• Double-Declining Rate is calculated as (1/10)*(2) = 20%. Multiply this rate with the Carrying value of each year to get the depreciation figure for next year.

I've attached a screenshot of my workings, I hope it will help you better understand the scenario. Thanks!