New Deli is in the process of closing its operations. It sold its three-year-old

Question

New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $324,600. The ovens originally cost $433,000 and had an estimated service life of 10 years and an estimated residual value of $28,000. New Deli uses straight-line depreciation for all equipment.

Calculate the balance in the accumulated depreciation account at the end of the third year.

Calculate the book value of the ovens at the end of the third year.

What is the gain or loss on the sale of the ovens at the end of the third year?

Explanation / Answer

Accumulated depreciation account at the end of the third year = (433000-28000)/10*3= $121500 Book value of the ovens at the end of the third year = 433000-121500= $311500 Gain on the sale of the ovens at the end of the third year = 324600-311500= $13100

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