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the cromwell company sold equipment for $35,000. the equipment, which originally cost $120,000 and had an estimated useful life of 10 years and $20,000 residual value, was depreciated for four years using the straight-line method. cromwell should report the following on its income statement in the year of sale:

Respuesta :

When applying the straight-line method, Cromwell should record a $45,000 loss on its income statement in the year of the transaction.

Define straight-line method.

Straight line basis is a technique for calculating depreciation and amortization, or the process of expensing an asset over a longer period of time than when it was purchased. It is calculated by dividing the difference between an asset's purchase price and its estimated salvage value by the asset's estimated useful life.

Initial Investment: $120,000

Life expectancy: 10 years

Remaining Value: $20,000

Depreciation each year - ($120,000-20000) / 10 = $10,000

Depreciation over four years = 10*4 = $400,000.

Book value available: $120,000 – $40,000 = $80000

$35k is the value at sale.

Loss on disposal is equal to 80,000-35 000, or $45,000.

To know more about straight-line method, visit:

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