How to Calculate Cash Received from Sale of Machinery
What was the original cost of the machinery purchased by Marigold Corp.?
The original cost of the machinery purchased by Marigold Corp. was $1,260,000.
What was the salvage value of the machinery?
The salvage value of the machinery was $84,000.
What was the useful life of the machinery?
The useful life of the machinery was 5 years.
What was the gain recorded from the sale of the machinery?
The gain recorded from the sale of the machinery was $26,500.
How much cash did Marigold receive from the sale of the machinery?
The cash received from the sale of the machinery was $267,300.
Calculation of Cash Received from Sale of Machinery
To calculate the cash received from the sale of the machinery, we need to consider the original cost, salvage value, useful life, and gain recorded.
Marigold Corp. purchased the machinery for $1,260,000 with a salvage value of $84,000 and a useful life of 5 years. When the machinery was sold, a gain of $26,500 was recorded.
First, we need to calculate the net book value of the machinery at the time of sale. The annual depreciation is calculated as (original cost - salvage value) / useful life, which is ($1,260,000 - $84,000) / 5 = $235,200 per year.
The depreciation up until January 1, 2021, is $235,200 * 4 years = $940,800. Adding the depreciation for the 4 months until the sale date on May 1, 2021, we get a total depreciation of $1,019,200.
The net book value of the machinery at the time of sale is the original cost minus the total depreciation, which is $1,260,000 - $1,019,200 = $240,800.
Finally, the cash received from the sale of the machinery is the net book value plus the gain recorded, which is $240,800 + $26,500 = $267,300.