What was the effect of the sale

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The Saturn Co. purchased a used machine for $ 110,000 on January 2. The company projects that the machine will be used for a period of five years and will have a salvage or residual value of $ 10,000. The depreciation method used by the Saturn Company is the Straight Line.

Problem 1: On December 31, at the end of the fourth year in operation, the machine was sold for a price of $ 25,000. What was the effect of this sale?

1- The $ 25,000 received in cash for the sale is added to the income of the year in which the sale was made

2- A loss was incurred on the sale

3- A profit was made on the sale

4- There is no effect, since the machine was sold before the five years that it was thought would be useful.

Reference no: EM132934410

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