Bowie Company uses a calendar year and the straight line depreciation method. On December 31, 2018, after adjusting entries were posted, Bowie Company sold a machine which was originally purchased on January 1, 2015. The historical cost was $24,000, the salvage value assumed was $2,000 and the original estimated life was five years.. It was sold for $4,400 cash. Using this information, how much should be recorded on December 31 for the Gain or (Loss)? Round to whole dollars.

There is no gain or loss as the sale value ie equal to the net book value

Explanation:

Computation of gain or loss on disposal of equipment

Historical cost of machine                                        $ 24,000

Less: Estimated salvage value                                 $   2,000

Depreciable basis                                                      $ 22,000

Estimated useful life                                                     5 years

Depreciation cost per year $ 22,000/5                   $ 4,400

Depreciation charged for the period

January 1 2015 to December 31 2018 = 4 years

$ 4,400 * 4 years                                                       $ 17,600

Net book value of machine on date of sale

$ 22,000 - $ 17,600                                                   $  4,400

Sale value of machine                                               $   4,400

Gain or Loss                                                                         0          

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