Answer:
The gain on sale of asset is of $800
Explanation:
The depreciation of the asset is computed as:
Annual depreciation = Original Cost - Estimated residual value / Useful life of the asset
= $40,000 - $6,000 / 5
= $34,000 / 5
= $6,800 per year
So, the depreciation for 2 years will be $13,600 ($6,800 + $6,800).
After 2 years, the value of the asset will be:
= Cost - Depreciation for 2 years
= $40,000 - $13,600
= $26,400
Now, we will compute the gain or loss on sale as:
Gain or loss on sale = The value of asset after 2 years - Sale value
= $26,400 - $25,600
= $800 (Gain).
So, there is gain of $800 on sale of the assets after 2 years.
