On December 31, 2013, Stable Company sold a piece of equipment that was purchased on January 1, 2008. The equipment originally cost $910,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $257,000?

The company should recognize a gain on disposal of $29500

Explanation:

The straight line depreciation method charges a constant depreciation expense per year through out the estimated useful life of the asset.

The straight line depreciation expense per year is,

(Cost - salvage value) / estimated useful life

Depreciation expense = (910000 - 0) / 8   =  $113750

The number of years till 31 December 2013 = 6 years

The accumulated depreciation till December 31, 2013 = 113750 * 6 = $682500

The carrying value of the asset at 31 December 2013 = 910000 - 682500 = $227500

The gain/loss on sale = 257000 - 227500  =  $29500 gain

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