# On January 1, 2018, Dunbar Echo Co. sells a machine for $24,600. The machine was originally purchased on January 1, 2016 for $43,700. The machine was estimated to have a useful life of 5 years and a residual value of $0. Dunbar Echo uses straight-line depreciation. In recording this transaction:_________ a. a loss of $1,620 would be recorded b. a gain of $1,620 would be recorded c. a loss of $19,100 would be recorded d. a gain of $24,600 would be recorded

1 answer

###### Question:

On January 1, 2018, Dunbar Echo Co. sells a machine for $24,600. The machine was originally purchased on January 1, 2016 for $43,700. The machine was estimated to have a useful life of 5 years and a residual value of $0. Dunbar Echo uses straight-line depreciation. In recording this transaction:_________

a. a loss of $1,620 would be recorded

b. a gain of $1,620 would be recorded

c. a loss of $19,100 would be recorded

d. a gain of $24,600 would be recorded

a. a loss of $1,620 would be recorded

b. a gain of $1,620 would be recorded

c. a loss of $19,100 would be recorded

d. a gain of $24,600 would be recorded

## Answers

Answer:a. a loss of $1,620 would be recordedExplanation:The straight line depreciation method charges a constant depreciation through out the estimated useful life of the asset.Depreciation expense per year = (Cost - Residual value) / Estimated useful life of the assetDepreciation expense = (43700 - 0) / 5 = $8740Accumulated depreciation at 1 January 2018 = 8740 * 2 = 17480Net Book value at 1 January 2018 = 43700 - 17480 = $26220Gain/ (Loss) on sale = 24600 - 26220 = ($1620) or loss of $1620

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