Question

On January 2, 2017, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $8,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Answer 1

Answer:

Loss= -$3,000

Explanation:

Giving the following information:

Selling price= $1,000

Purchase price= $12,000

Accumulated depreciation= $8,000

First, we need to calculate the book value:

Book value= 12,000 - 8,000= $4,000

If the book value is higher than the selling price, the company loses from the sale:

Gain/loss= selling price -  book value

Gain/loss= 1,000 - 4,000

Loss= -$3,000