Homework Answers
Here it is given that no depreciation is to be charged for the year of acquisition and a full year of depreciation is to be charged for the year of retirement of the machine. It means that the depreciation will be for 5 full years [ i.e. from year 2014 to year 2018 ]
Depreciation per annum as per straight line depreciation = [ Cost - Estimated salvage value ] / Estimated useful life = [ $92,700 - $9,270 ] / 9 years = $9,270
Depreciation of 5 years = Depreciation per annum * 5 years = $9,270 * 5 years = $46,350
Book value of the machine at the time of sale = Cost - Depreciation of 5 years = $92,700 - $46,350 = $46,350
Gain to be recognized at the time of sale = Sale value of machine - Book value of the machine at the time of sale = $50,000 - $46,350 = $3,650
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year ended December 31, 2017, Crane should record depreciation
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