Amanda Company purchased a computer that cost $11,800. It had an estimated usefu

Question

Amanda Company purchased a computer that cost $11,800. It had an estimated useful life of 5 years and a residual value of $1,900. The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,900 cash. How much of a gain or loss should Amanda record?

A. A loss of $40.

B. A loss of $5,900.

C. A gain of $1,900.

D. A gain of $40.

Amanda Company purchased a computer that cost $11,800. It had an estimated useful life of 5 years and a residual value of $1,900. The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,900 cash. How much of a gain or loss should Amanda record?

Explanation / Answer

Answer. D. A gain of $40 Dep. Charged per Annum under Straight Line Method = (11800 - 1900) / 5 Years = $1980 Per annum Cost of Computer    11,800.00 Less: Accumulated dep - $1980 X 3 Years      5,940.00 Book Value of Computer at the end of 3 Year      5,860.00 Commpuer - Sold      5,900.00 Gain on sale of Computer            40.00

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