On January 1, 2010, the Accumulated Depreciation—Machinery account of a particul

Question

On January 1, 2010, the Accumulated Depreciation—Machinery account of a particular company showed a balance of $370,000. At the end of 2010, after the adjusting entries were posted, it resulted balance of $395,000. During 2010, one of the machines which cost $125,000 was sold for $60,500 cash. This resulted in a loss of $4,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2010?

a. $85,500 b. $93,500 c. $25,000 d. $60,500

I know the answer is A. Please explain. Thank you!

Explanation / Answer

a. $85,500

Book Value of the machine sold = $60,500 + $4,000 = $64,500

Accumulated Depreciation on the machine sold = Cost - Book value on date of sale = $125,000 - $64,500 = $60,500

Depreciation expense for 2010 = Ending Accumulated Depreciation - Beginning Accumulated Depreciation + Accumulated Depreciation on the machine sold = $395,000 - $370,000 + $60,500 = $85,500

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