Post Company uses straight- line depreciation for all of its depreciable assets. Post sold a piece of machinery on December 31, 2009, that it purchased on January 1, 2009 for $ 2,000. The asset had a five- year life and zero residual value. Accumulated depreciation was $400. If the sales price of the used machine was $ 1,200, the resulting gain or loss on disposal was which of the following amounts? Gain of $400 Gain of $ 1,200. Loss of $ 400. Loss of $800
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.
Post Company uses straight- line
Gain of $400
Gain of $ 1,200.
Loss of $ 400.
Loss of $800
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