Question

On December 31, 2020, after the adjusting entries were posted, the Accumulated Depreciation—Machinery account of Klopp had a balance of $882,000. During 2020, one of the machines that cost $387,000 was sold for $215,000 cash. This resulted in a loss of $20,000. Depreciation expense for 2020 was $72,000. Assuming that no other assets were disposed of during the year, how much was the accumulated depreciation balance on January 1, 2020?

Multiple Choice

• $942,000

• $962,000

• $822,000

• $802,000

Answer 1

Answer

• Correct Answer = Option #2: $ 962,000
• Working

Step #1

A	Sale Price of machine	$215,000
B	Loss on sale	$20,000
C = A+B	Book Value of machine sold	$235,000
D	Cost of machine sold	$387,000
E = D - C	Depreciation balance of machine sold	$152,000

Step #2

A	Accumulated Depreciation - 31 Dec 2020	$882,000
B	Depreciation balance of machine sold [calculated in Step #1]	$152,000
C	Depreciation expense for 2020	$72,000
D = A+B - C	Accumulated Depreciation - 1 Jan 2020	$962,000 [Answer]