[jessanqi]

Hi, just wondering do we need to take deprecation on the year the asset was sold or disposed??

Please advise!!

Thank you!

On July 1, 2011, Victor Company purchased for $85,000 a machine having a useful life of ten years and an estimated salvage value of $5,000. The machine was depreciated by the straight-line method. On July 1, 2016, the machine was sold for $45,000. For the year ended December 31, 2016, how much gain should Victor record on the sale?

you chose A. $0
B. $1,000
C. $4,000
D. $6,750

Explanation
The correct answer is A. The depreciable amount for this machine is $80,000 (cost of $85,000 less salvage value of $5,000). Since Victor uses the straight-line method of depreciation, the annual depreciation expense (assuming the given ten-year useful life) is $8,000. Since Victor used this machine for 5 years (July 1, 2011 thru July 1, 2016) the accumulated depreciation is 5 × $8,000 = $40,000. The book value of the machine on the date of sale is $45,000 (cost of $85,000 less accumulated depreciation of $40,000). If the proceeds from the sale were $45,000, then Victor has no realized gain. Note, in both the year the machine was acquired and sold, there would be only a half year of depreciation.