Little Company purchased machinery for $1,060,000 on January 1, 20X1. Straight-line depreciation has been recorded based on a $40,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 20X5 at a gain of $20,000. How much cash did Little receive from the sale of the machinery? Question 37 options: $176,000. $196,000. $236,000. $198,000.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Little Company purchased machinery for $1,060,000 on January 1, 20X1. Straight-line
Question 37 options:
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$176,000. |
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$196,000. |
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$236,000. |
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$198,000. |
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