Answer:
$45,000
Explanation:
Data provided in the question:
Selling cost of the furniture on May 1, 2015 = $300,000
Original cost of the machine on January 1, 2008 = $750,000
Depreciable Life of the furniture = 10 years
Salvage value = $75,000
Now,
Annual depreciation = [tex]\frac{\textup{Purchasing cost - salvage value}}{\textup{life}}[/tex]
or
Annual depreciation = [tex]\frac{\textup{750,000 - 75,000}}{\textup{10}}[/tex]
or
Annual depreciation = $67,500 per year
The total duration from the date of purchase to date of selling
= 7 years 4 months
or
= 7 × 12 + 4 months
= 88 months
= [tex]\frac{88}{12}[/tex] years
therefore,
The total accumulated depreciation till the date of sale
= Annual depreciation × Duration
= $67,500 × [tex]\frac{88}{12}[/tex]
= $495,000
Thus,
The book value on May 1, 2015
= Purchasing cost - Accumulated depreciation
= $750,000 - $495,000
= $255,000
Hence,
The gain recognized = Selling cost - Book value
= $300,000 - $255,000
= $45,000
