Jamison Company reports depreciation expense of $48,000 for Year 2. Also, equipment costing $164,000 was sold for a $5,800 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
At December 31 Year 2 Year 1
Equipment $ 650,000 $ 814,000
Accumulated
Depreciation-Equipment 460,000 540,000
a) $41,800.
b) $36,000.
c) $30,200.
d) $48,000.
e) $84,000.

The correct answer is (a) $41,800.

Explanation:

Solution:

Given that:

The first step taken is to calculate for depreciation on sold equipment:

                                                                       Amount($)

Accumulated depreciation in Year -1  (a) = 540000

Depreciation for the year 2 (b) =  48000

Accumulated depreciation to be in year 2c=(a+b)=588000

Reported accumulated depreciation in year 2(d)=460000

Thus,

Depreciation on sold Equipmente= (c-d) = 128000

Now,

The second step is to calculate sale proceeds:

Cost (a)= 164000  

Depreciation(b) =128000

The written dawn value c=(a-b) =36000

Gain on sale of equipment (d)=5800  

The Sale Price (c+d)=41800

Therefore, the sale of the equipment is $41,800

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