Alexander Company purchased a piece of equipment for $12,000 and depreciated it

Question

Alexander Company purchased a piece of equipment for $12,000 and depreciated it for three years over a five-year estimated life with an expected residual value at the end of five years of $2,000. At the end of the third year, Alex decided to upgrade to equipment with increased capacity and sold the original piece of equipment for $7,200.

Calculate the gain or loss on the disposal at the end of the third year.(Input the amount as positive value. Omit the "$" sign in your response.)

Alexander Company purchased a piece of equipment for $12,000 and depreciated it for three years over a five-year estimated life with an expected residual value at the end of five years of $2,000. At the end of the third year, Alex decided to upgrade to equipment with increased capacity and sold the original piece of equipment for $7,200.

Explanation / Answer

Depreciation per year = (12000 - 2000)/5 = $2000 Book value at the end of 3rd year = 12000 - 2000 x 3 = $6000 Thus, there is a gain on sale by 7200 - 6000 = $1200 Hope this helps!

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