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Beerbo Inc. owns machinery that cost $20,000 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2020. The machinery is sold on September 1, 2021, for $5,200. What amount of gain (loss) must Beerbo record from the transaction

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Answer:

$4,800

Explanation:

For calculating the amount of gain or loss we need to pass the journal entries which are shown below:

Depreciation expense $1,600

         To Accumulated depreciation $1,600

(Being the depreciation expense is recorded)

The computation is shown below:

= 2,400 × 8 months ÷ 12 months

= $1,600

The eight months is calculated from December 31, 2020 to September 1, 2021

The another entry for selling the machine is

Cash  $5,200

Accumulated depreciation $10,000   ($8,400 + $1,600)

Loss on sale of machinery $4,800

              To Machinery A/c  $20,000

(being the sale of machinery is recorded)

The loss on sale of machinery is a balancing figure

             

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