Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for S24,500. Strawberry Fields recorded depreciation using the straight-line method, a five-year service life, and an $7,000 residual value. 1. What was the gain or loss on the sale? 2. Record the sale.
Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for S24,500. Strawberry Fields recorded depreciation using the straight-line method, a five-year service life, and an $7,000 residual value. 1. What was the gain or loss on the sale? 2. Record the sale.
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $24,500. Strawberry Fields recorded depreciation using the straight-line method, a
five-year service life, and an $7,000 residual value.
1. What was the gain or loss on the sale?
2. Record the sale.
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