New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery...
Question:
New Morning Bakery is in the process of closing its operations.
It sold its two-year-old bakery ovens to Great Harvest Bakery for $650,000.
The ovens originally cost $855,000, had an estimated service life of 10 years, and an estimated residual value of $55,000. New Morning Bakery uses the straight-line depreciation method for all equipment.
1. Calculate the balance in the accumulated depreciation account at the end of the second year.
2. Calculate the book value of the ovens at the end of the second year.
3. What is the gain or loss on the sale of the ovens at the end of the second year?
Straight Line Depreciation Method:
Under Straight line depreciation, the principle recognizes the carrying amount of a fixed asset evenly over its useful life. It is employed when there is no particular pattern to the manner in which an asset is to be utilized over time.
Answer and Explanation: 1
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View this answer1. Calculate the balance in the accumulated depreciation account at the end of the second year.
| Original Cost of Bakery Oven | $855,000 |
| less:... |
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Straight-line depreciation is a method used to calculate the decline in value of fixed assets, such as vehicles or office equipment. Learn how and when to use this formula.
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