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A Machine Was Purchased for $100,000 in 2011 and Used

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Essay

A machine was purchased for $100,000 in 2011 and used for four years,during which $60,000 of depreciation accumulated.The machine was then sold for $50,000 cash.What is the gain or loss on this transaction? Assume depreciation is up to date at the time of the sale.


Definitions:

Compounded Annually

A method of calculating interest in which the interest earned each year is added to the principal, so that the balance doesn't merely grow, it grows at an increasing rate.

Present Value

The present value of a future amount of money or sequence of cash flows, based on a certain rate of return.

Notes Payable

Short or long-term financial obligations evidenced by promissory notes, requiring the borrower to repay the principal amount along with any accrued interest.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.

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